PUBLICATIONS & REPORTS

Contents Introduction

This paper develops a theoretical framework to study the policy implications of learning-byexporting. We introduce credit constraint into the learning-by-exporting model and discuss possible government intervention. The analysis shows that supporting a learning industry via an export subsidy improves social welfare when the economy maintains a balanced trade condition. However, infant industry protection is not necessarily justified if consumers can access to the international financial market. A learning sector’s goods could be overproduced (relative to another non-tradable sector goods) when consumers can borrow freely for their consumption. Social welfare will be improved once the government levies a tax on the production.