Can Subsidies for Mars Be Procompetitive?

25 Pages Posted: 17 Apr 2000 Last revised: 29 Oct 2015

See all articles by Kala Krishna

Kala Krishna

Pennsylvania State University - Department of Economics; National Bureau of Economic Research (NBER)

Suddhasatwa Roy

California State University, Fullerton - Department of Economics

Marie C. Thursby

Georgia Institute of Technology - Strategic Management Area; National Bureau of Economic Research (NBER)

Date Written: March 2000

Abstract

In contrast to recent literature, we show that market access requirements (MARs) can be implemented in a procompetitive manner even in the absence of threats in related markets. By focusing on subsidies that are paid only when the requirement is met, we show that a MAR can increase aggregate output relative to free trade provided that the right set of firms is targeted. In the context of a model with multiple Japanese and US firms, we show that a MAR on US imports is procompetitive as long as the US firms are the ones targeted to receive the subsidy.

Suggested Citation

Krishna, Kala and Roy, Suddhasatwa and Thursby, Marie C., Can Subsidies for Mars Be Procompetitive? (March 2000). NBER Working Paper No. w7624, Available at SSRN: https://ssrn.com/abstract=220249

Kala Krishna (Contact Author)

Pennsylvania State University - Department of Economics ( email )

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National Bureau of Economic Research (NBER)

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Suddhasatwa Roy

California State University, Fullerton - Department of Economics ( email )

Fullerton, CA 92834
United States

Marie C. Thursby

Georgia Institute of Technology - Strategic Management Area ( email )

800 West Peachtree St.
Atlanta, GA 30308
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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