Optimal international agreement and restriction on domestic efficiency

• 成果类型: Article
• 署名作者: Lee, Gea M.
• 署名单位: Singapore Management University
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/j.jinteco.2016.01.003
• 发表日期: 2016
• 页码: 138-155
• 关键词: Optimal agreement; Restriction on domestic efficiency; Market-access preservation rule; GATT/WTO subsidy rules

摘要

The WTO's strict treatment of domestic subsidies has not been well received in the existing literature. An essential reason is that the consequent restriction on domestic efficiency is hardly compatible with the existing theory of government intervention under which the primary objective of using domestic subsidies, domestic efficiency, is not sacrificed for another objective. We develop a trade-agreement model in which the magnitude of a legitimate domestic subsidy with which to address a production externality is private information. We find that an optimal agreement substantially restricts domestic efficiency for the international objective of expanding market access. (C) 2016 Elsevier B.V. All rights reserved.