Agricultural Export Subsidies and Intermediate Goods Trade
1995
Paarlberg, P. L.
In this paper I examine the effects of export subsidies when a bulk commodity is an intermediate good which is either exported or processed into a higher‐value agricultural good for domestic or export sale. The analysis shows that while the industry producing the subsidized good benefits, the industry producing the other good may not. A bulk commodity export subsidy may lower the price of the higher value agricultural commodity. An export subsidy on the higher‐value agricultural commodity may lower the bulk commodity's price. The outcome depends on the relative excess supply and excess demand elasticities and on the market structure.
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