Comparing two different trade policy tools

This paper develops a Bertrand price competition model with
differentiated goods in which export subsidies are compared to
exchange rate depreciation as different government policies for
promoting exports. National governments may wish to help domestic
firms to expand market shares in profitable areas and might do
this through either one of these two tools. Their effects on
equilibrium values are analyzed and compared. It is shown that
while the two examined trade policies give rise to the same
highest welfare, they could produce some significant differences
according to circumstances. If the exchange rate is sufficiently
high and the level of the nominal wage sufficiently low, the
marginal effect of the subsidy will be higher. But if unions are
strong (and demand a high nominal wage) and the exchange rate is
sufficiently low, the governments could also consider a
depreciation as an alternative policy to export subsidies.