Subsidy Bidding Wars and the Structure of Multi-Plant Firms
Lapointe, Simon; Morand, Pierre-Henri (2019-01-22)
Lapointe, Simon
Morand, Pierre-Henri
Valtion taloudellinen tutkimuskeskus
22.01.2019
Julkaisun pysyvä osoite on
https://urn.fi/URN:ISBN:978-952-274-232-2
https://urn.fi/URN:ISBN:978-952-274-232-2
Kuvaus
nonPeerReviewed
Tiivistelmä
Governments spend large amounts of money to attract firms to their territory, often resulting from bidding wars against other regions. Previous papers show that such bidding wars can improve social welfare by allocating the investment to the regions that value it the most. In this paper, we depart from the usual assumption of exogenous, single-plant investment. We show that in this context, bidding wars incite the firm to allocate its investment strategically, by investing more and differentiating the plants. In turn, the firm receives larger subsidies. Despite these distortions, bidding wars may remain socially optimal, as in simpler models.
Tutkimusteema
Local public finance and provision of public services, Business regulation and international economics
JEL
D44, H71, H25, D21, L23
Avainsanat
subsidies, regional governments, bidding wars, multi-establishment firms, auctions
Kokoelmat
- VATT Working Papers [164]