Title
The Number of Firms and the Politics of Export Subsidy.
Abstract
The purpose of this paper is to present a framework to understand that the government's implementation
of export subsidy is influenced by the political pressure from the home firms which can bear the costs
of forming and maintaining a lobby in order to overcome a free-rider problem associated with lobbying.
When the number of the foreign firms is large in comparison with that of the home firms, the home
firms can organize a lobby group more easily and lobby for higher export subsidy. The implementation
of politically optimal export subsidy can make the domestic social welfare far worse than when the free
trade is maintained by a multilateral agreement which prohibit export subsidies.