Explain why such governments would rather subsidize

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Governments in some European countries are believed to make substantial use of industrial subsidies to avert the contraction of some industrial sectors. What difference does it take for national welfare whether the subsidy applies to domestic sales,export sales,or both? Governments do not find it easy to raise tax revenues to finance such subsidies. Does that face help explain why such governments would rather subsidize an industry’s export sales than its sales in the domestic market?

Reference no: EM13147720

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