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.

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19 May 2016     Paper Number CEPDP1431

Download PDF - Protectionism through exporting: subsidies with export share requirements in China

This CEP discussion paper is published under the centre's Trade programme.