TY - BOOK ID - 146595940 TI - Trade Spillovers of Domestic Subsidies AU - Rotunno, Lorenzo. AU - Ruta, Michele. PY - 2024 SN - 9798400269684 PB - Washington, D.C. : International Monetary Fund, DB - UniCat KW - Balance of trade KW - Commercial policy KW - Currency crises KW - Economic & financial crises & disasters KW - Economics of specific sectors KW - Economics KW - Economics: General KW - Empirical Studies of Trade KW - Export competitiveness KW - Export subsidies KW - Exports and Imports KW - Exports KW - Externalities KW - Imports KW - Informal sector KW - International economics KW - International Trade Organizations KW - International trade KW - Macroeconomics KW - Models of Trade with Imperfect Competition and Scale Economies KW - Trade balance KW - Trade Policy KW - Trade policy KW - Trade: General UR - https://www.unicat.be/uniCat?func=search&query=sysid:146595940 AB - As governments resort to industrial policies to achieve economic and non-economic objectives, the number of subsidies implemented each year has more than tripled in the last decade. Using detailed data across a large number of advanced and emerging economies, we empirically investigate the effects of domestic subsidies on international trade flows. Estimates from a difference-in-difference specification show that on average subsidies promote both exports and imports. These effects are partly driven by selection into subsidies, as governments target export-oriented and import-competing products. The results however mask significant differences across countries. Specifically, exports of subsidized products from G20 emerging markets increase 8 percent more than exports of other products, with no evidence of selection. The gravity estimates confirm that subsidies promote international relative to domestic trade. These spillover effects are concentrated in some industries, such as electrical machinery, and are stronger when subsidies are given through tax breaks than other policy instruments. The subsidy-led rise in trade calls for international cooperation to manage risks of retaliatory actions and possible drifts towards a subsidy war. ER -