Trade Taxes and Welfare: The Case of Export Incentives in South-East Asian Countries

It is now widely recognised that the distortions common in many developing countries lead to a bias against exporting. In consequence many governments have begun to provide export incentives aimed at compensating for this bias. This article begins by examining the range of such incentives offered in South-East Asian countires. It then goes on to use the standard theory of the second-best to develop a simple framework within which these policies can be assessed. The difficulties encountered in constructing a system of export incentives that will not introduce distortions of their own are highlighted. The constraints imposed by GATT obligations are also noted. Copyright 1990 The University of Melbourne, Melbourne Institute of Applied Economic and Social Research.