Is An Export Subsidy Socially Beneficial under Corruption?

According to the influential model suggested by Brander and Spencer(1985), an increasing export subsidy can increase a market share of the firm in foreign markets and a social welfare of the country under the assumption of neutral government. In this paper, using the concept of a politically realistic objective function (PROF), I try to develop a policy decision model when the government decision makers are corrupt. Within this particular setup, the theoretical finding of the paper shows that a collusion equilibrium can exist between policy makers and high cost firm. In this case, agricultural export can be increased with an export subsidy, however, it is not socially beneficial.