Assessing the efficiency of exchange rate-linked subsidies (ERLS) for non-price export promotion: the case of cotton

Notwithstanding substantial federal financial support for the export promotion of agricultural products, ways to enhance the effectiveness of federal funding have not been discussed in empirical research. In this study, an equilibrium displacement framework was developed to evaluate whether the efficacy of export promotion expenditures could be increased by linking them with changes in the exchange rate. In our analysis, the gross gain to domestic cotton producers from the exchange rate linked subsidy scheme was positive. Findings support exchange rate linked subsidies for export promotion of agricultural products.