Government Support and Export: a Did Approach
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Date
2008-06
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A.A.U
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 2000 and
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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Keywords
Government Support and Export