CEPR - Centre for Economic Policy Research’s Post

📈As governments increasingly resort to industrial policy to achieve economic and non-economic objectives, the number of #subsidies has more than tripled in the last decade. ⭐This column investigates the effects of domestic subsidies on #trade flows. 👉It shows how these measures can alter comparative advantage patterns and hence affect export dynamics, especially in large emerging markets. 🔄These trade spillover effects can lead to tit-for-tat retaliation and should be accounted for in the cost-benefit analysis of industrial policy. 📢International cooperation can manage the risks of possible drifts towards a subsidy war. Vox column by: Lorenzo Rotunno (Aix-Marseille University, International Monetary Fund), Michele Ruta (International Monetary Fund) Read more here: https://ow.ly/B0j450U4VPe

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