Government Support and Export: A DID Approach
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2008-06
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Abstract
The government of Ethiopia have been trying to create a good environment for investors and exporters of non-traditional product by providing different export and investment incentives. Among these are the Export Trade Duty Incentives and Export Credit Guarantee Scheme. This study investigates the impact of these schemes on export. A Difference -in-Difference methodology was used to estimate effects of the two export incentives adopted in Ethiopia. With data for individual exporters of the year 2000and 2002 , the DID estimation shows significant impact of export incentives on export .But this should not be over emphasised ,one has to look at the costs for the government either in terms of foreign exchange or opportunity cost of the funds to the country. The government have been providing substantial amount of support to exporter up on their demand to hit the intended target with out no cross checking of whether the subsidy have been used properly or not as long as the firm export the targeted amount. Hence thinking of what this funds could do in other sector or areas of investment. As well thinking of how little variation of export is explained by subsidy as it shown in the DID methodology. The government should consider the cost of subsidy hand in hand with the gain from this subsidy.
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Applied Trade Policy Analysis, Trade Policy Analysis