Effects of export taxes in an endogenous growth model with industrial location

This paper examines the impact of export taxes on the global growth rate and the welfare of individual countries within an endogenous growth model that incorporates industrial location and local knowledge spillovers. We demonstrate that when the elasticity of substitution between differentiated goods is large, the transport cost is high, consumption spending on differentiated goods is low, and the export tax rate of the agglomeration (non-agglomeration) country is low, an agglomerated country’s increase in export taxes decreases the world growth rate. Conversely, an increase in export taxes by a non-agglomerated country enhances the global growth rate under the same conditions. Furthermore, welfare analysis results show that an export tax increase in an agglomeration country diminishes the welfare of agglomeration and non-agglomeration countries if the labor endowment is substantial and R&D sector productivity is high. However, an export tax increase in a non-agglomeration country improves the welfare of both countries under the same conditions.