Credibility and the Cost of Export Subsidies

Author/Editor:

Alexander W. Hoffmaister

Publication Date:

December 1, 1991

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

Recurring balance of payments crises in countries that pursued import substitution have led some of them to establish a variety of export incentives, in particular subsidies, as a way to revive and re-orient their economies. However, exporters are likely to be uncertain of the government’s commitment to export promotion because of the years of neglect. This paper analyzes the issue of the credibility of export subsidies and suggests that a government is able to convince exporters of its commitment only at a cost, which reduces the attractiveness of promoting exports by means of subsidies.

Series:

Working Paper No. 91/129

English

Publication Date:

December 1, 1991

ISBN/ISSN:

9781451855081/1018-5941

Stock No:

WPIEA1291991

Format:

Paper

Pages:

44

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