Empirically Analyzing the Impacts of U.S. Export Credit Programs on U.S. Agricultural Export Competitiveness



(4)


c1


αI

Pl


(5)


c2


βi

P 2


(b) The Marshallian Demands with the Presence of Export Credits

In contrast, if the consumer in the importing country receives secondary benefits
from an export credit program, his/her budget constraint is likely to be affected due to the
cost saving on the import payment. From above discussion, this study presumes that the
consumer views his/her cost saving on the import payment as being discounted. Thus,
his/her budget constraint can be formulated as:

(6)        P1fC1f-d(P1fC1f)+P2fC2f=If

P1f(1-d)C1f+P2fC2f=If

Note that ‘d’ refers to the fixed discount rate discussed above14. The range of the subsidy
element is assumed to take on the value of 0
d1 . If d = 0 , this implies that there is
no discount on the import payments; thus, the budget constraint formulated in equation
(6) is just the same as the budget constraint in equation (3b). If
d = 1 , then there is a full
discount such as for aid relief, which implies that consumption of good 1 is not an
optimization choice for the consumer in the importing country. Thus, this study assumes
that
d1 .

By applying a similar utility maximization procedure, , the Marshallian demands
of goods 1 and 2 can be obtained as:

14 See Rienstra-Munnicha (2004) for more detailed formulation of this budget constraint.

17



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