where he/she can purchase the tradable good Y at a cheaper price due to cost savings.
This is captured by the effective price with the cost savings recorded in equation (9).
When trade opens up, both the consumer and firm in the importing country face
the same effective price. Therefore, this study derives the import demands of the
importing country in the presence of secondary benefits from an export credit program by
replacing price of the import demands expressed in equations (13) by the effective price
expressed in equation (9). The import demands of the importing country in the presence
of secondary benefits from an export credit program are recorded in equation 14 below.
Note that the introduction of the superscript ‘ S ’ refers to the presence of secondary
benefits from an export credit program offered to the importing country.
2αB I(1-d)2-P2
(14) Q =---—-------
2B(1-d)P
Holding all other exogenous variables and parameters fixed, the two scenarios of
the importing country’s inverse import demand can be presented graphically as in Figure
1. It is seen that in the presence of secondary benefits from an export credit program, the
inverse import demand of the importing country vertically shifts to the right of the import
demand where there are no secondary benefits. As cited earlier, the results presented
here resemble the graphical result of a direct consumption subsidy presented by Houck
(1986).
Data Sources:
In choosing the importing countries in our data sample, we consider seven importing
countries which received GSM 102 export credits from the US over a consistent period.
Most of these countries are either not granted or approved export credit for wheat imports
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