NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Capital Subsidies and Countervailing Duties in Oligopolistic Industries

Barbara J. Spencer

NBER Working Paper No. 2519
Issued in February 1988
NBER Program(s):   ITI   IFM

Under GATT, countries are allowed to impose countervailing duties to offset foreign subsidies. However GATT rules limit the amount of duty to the amount of the subsidy. This paper examines a generalized model of imperfect competition with capital subsidies and shows the conditions under which a countervailing duty will offset the effect of the subsidy on exports. Also, conditions are specified under which exports will increase despite the imposition of the maximum tariff under GATT. In addition, the paper considers whether profit shifting motives for a subsidy still exist even when this maximum duty is anticipated.

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Document Object Identifier (DOI): 10.3386/w2519

Published: Spencer, Barbara J. "Capital Subsidies and Countervailing Duties in Oligopolistic Industries," Journal of International Economics, vol. 25, no. 1/2, pp 217-234. August 1988.

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