The Difference in Export Tax and Export Subsidy International trade Please, explain the difference between an export tax and an export subsidy.
Which one do you believe to be the best, and why? Place yourself in the role of a small Main Street shop owner. Does your perspective change? What if you are a moderately sized West Coast software company? Do your feelings about either option change if you are a Midwest grain producer? A general equilibrium macroeconomic model is used to study the equivalence of export subsidies and import tariff reductions in increasing export output. It is shown that the qualitative effects of both policies are the same; an import tariff reduction is an equally viable alternative for expanding exports. It is also seen that in a typical developing economy with a large nontradable goods sector, the import tariff reduction may well be a better choice in this regard.