Do export subsidies dampen export unit values across markets? A case study on Pakistan

The export unit value is influenced by the characteristics of the export market destination. However, this influence is dampened when export subsidies are provided by the government on specific products to incentivize the exporters. We use firm-level data on Pakistani exporters merged with product-level data on the provision of export subsidies in this study. We find that the provision of export subsidies on the products exported dampens this relationship as some of the export market characteristics that otherwise influence export unit value become insignificant. We split the sample of firms according to the product classification of the products exported, such as differentiated industrial products and homogenous non-industrial products, and the size of total export sales to determine whether the provision of export subsidies dampens the impact of export market characteristics on export unit value across the different product classifications as well as across larger and smaller exporters. We believe that the results have implications for policymakers providing incentives to the exporters.