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CEP discussion paper
Protectionism through exporting: subsidies with export share requirements in China
Fabrice Defever and Alejandro Riaño
May 2016
Paper No' CEPDP1431:
Full Paper (pdf)

JEL Classification: F12; F13; O47

Tags: export share requirements; export subsidies; trade policy; heterogeneous firms; china

We study the effect of subsidies subject to export share requirements (ESR) - that is, conditioned on a firm exporting at least a given fraction of its output - on exports, the intensity of competition and welfare, through the lens of a two-country model of trade with heterogeneous firms. Our calibrated model suggests that this type of subsidy boosts exports more and provides greater protection for domestic firms than a standard unconditional export subsidy, albeit at a substantial welfare cost.