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Specific vs Ad Valorem Strategic Export Subsidies with Taxation Distortion
Author(s) -
Hwang Hong,
Mai ChaoCheng,
Yang YaPo
Publication year - 2015
Publication title -
review of development economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.531
H-Index - 50
eISSN - 1467-9361
pISSN - 1363-6669
DOI - 10.1111/rode.12185
Subject(s) - subsidy , distortion (music) , economics , ad valorem tax , microeconomics , welfare , social welfare , payment , deadweight loss , social cost , social benefits , public economics , double taxation , market economy , finance , amplifier , materials science , cmos , electronic engineering , tailings , political science , law , engineering , metallurgy
This paper employs a model to compare the welfare between optimal specific and ad valorem export subsidies if the subsidy payment is financed by distortional taxation. It is found that the welfare under the specific subsidy regime is higher (lower) than that under the ad valorem subsidy regime if the social cost of taxation distortion is low (high). Moreover, the signs of the two optimal subsidies are also crucially dependent on this social cost. They are positive (negative) if the social cost is low (high).