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A quantitative analysis of subsidy competition in the U.S.


Ossa, Ralph (2019). A quantitative analysis of subsidy competition in the U.S. NBER Working Papers 20975, National Bureau of Economic Research.

Abstract

I use a quantitative economic geography model to explore subsidy competition among U.S. states. I ask what motivates state governments to subsidize firm relocations and quantify how strong their incentives are. I also characterize fully non-cooperative and cooperative subsidy choices and assess how far away we are from these extremes. I find that states have strong incentives to subsidize firm relocations in order to gain at the expense of other states. I also find that observed subsidies are closer to cooperative than non-cooperative subsidies but the potential losses from an escalation of subsidy competition are large.

Abstract

I use a quantitative economic geography model to explore subsidy competition among U.S. states. I ask what motivates state governments to subsidize firm relocations and quantify how strong their incentives are. I also characterize fully non-cooperative and cooperative subsidy choices and assess how far away we are from these extremes. I find that states have strong incentives to subsidize firm relocations in order to gain at the expense of other states. I also find that observed subsidies are closer to cooperative than non-cooperative subsidies but the potential losses from an escalation of subsidy competition are large.

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Additional indexing

Item Type:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Economics
Dewey Decimal Classification:330 Economics
JEL Classification:F12, F13, R12, R58
Language:English
Date:January 2019
Deposited On:22 Mar 2017 13:47
Last Modified:16 Mar 2022 08:05
Series Name:NBER Working Papers
Number of Pages:54
Additional Information:Revised version
OA Status:Green
Official URL:https://www.nber.org/papers/w20975

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