Informational Rents and Discretionary Industrial Assistance

Colin Wren
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Colin Wren: University of Newcastle upon Tyne

No 222, Royal Economic Society Annual Conference 2003 from Royal Economic Society

Abstract: The paper analyses the existence and efficiency of discretionary industrial assistance schemes under asymmetric information between an uninformed government and a uniform distribution of firms with differing productivities. Discretionary assistance allows the government to scrutinise projects in an effort to learn the type to reduce the 'informational rents' of automatic assistance, where firms take up any contract on offer. Two discretionary grant schemes are analysed, which either exclude 'non-additional' projects or reduce the assistance to the minimum necessary for a project to proceed. The paper finds the conditions under which discretionary assistance exists and is more efficient than automatic assistance.

Keywords: subsidies; asymmetric information; discretionary assistance; investment grants (search for similar items in EconPapers)
JEL-codes: H2 D8 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-pbe
Date: 2003-06-04
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Persistent link: http://EconPapers.repec.org/RePEc:ecj:ac2003:222

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