In-Kind Export Subsidies for Processed and Bulk Goods

This research analyzes the interaction between a bulk commodity and a processed good under in-kind export subsidies. An in-kind export subsidy lowers the export price of the good on which it is paid. The other price changes are ambiguous. A numerical model for U.S. wheat and flour illustrates these conditions. Given the parameters of the model, an in-kind payment using wheat lowers flour prices and the export price of wheat. The U.S. domestic wheat price rises. When flour is used for the payment, U.S. wheat and flour prices rise, while the foreign flour price falls. Copyright 1996, Oxford University Press.