Subsidy competition in integrating economies

Facundo Albornoz () and Grégory Corcos

PSE Working Papers from PSE (Ecole normale supérieure)

Abstract: Regional integration affects location decisions of MNCs and therefore influences each member country's provision of investment incentives, which in turn may trigger relocation. As a consequence, subsidy competition increases as integration proceeds. We analyze the welfare consequences of this phenomenon, modelling subsidization as a game between a MNC facing different location alternatives and governments that may deter or induce relocation by means of subsidies. We show that the combination of integration and subsidy competition may lead to an excess of subsidization. We also discuss how the interest of harmonizing subsidies, the net gains from integration crucially depend on technological differences, ownership and the absorption capacity of MNC profits by countries. Lastly, we find that the gain from supranational subsidy coordination increases with integration.

Date: 2005
View list of references View citations in EconPapers

Downloads: (external link)
http://www.pse.ens.fr/document/wp200521.pdf (application/pdf)

Related works:
Working Paper: Subsidy Competition in Integrating Economies (2005)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:pse:psecon:2005-21

Access Statistics for this paper

More papers in PSE Working Papers from PSE (Ecole normale supérieure)
Contact information at EDIRC.
Series data maintained by ().