Should the Government Subsidize Exporters? (VIDEO)
Fletcher School, Tufts University and Harvard University
This conversation was recorded on August 1, 2019.
Only a very small share of U.S. companies export. The Department of Commerce puts the figure at 1% when looking at all incorporated firms across all sectors. Even in manufacturing, where exports are more important and firms on average are substantially larger, only about 35% of firms are classified as exporters (and this includes firms that sell to a distributor which then ships the products overseas). Yet exporters tend to be bigger, more productive and pay higher wages than companies that do not sell abroad. So should the government foster exporting by subsidizing these firms and those that may become exporters? Michael Klein, Executive Editor of EconoFact, and Marc Melitz (Harvard) highlight the difficulty in determining which firms are worth supporting at an early stage, the challenges in unwinding subsidization, and the lack of clarity on whether exporting itself makes firms more productive.