Bidding for Investment Projects: Smart Public Policy or Corporate Welfare?

Johannes Van Biesebroeck ()

Working Papers from University of Toronto, Department of Economics

Abstract: Recently, several governments in Canada have shown an increased willingness to subsidize private investment projects, especially in the manufacturing sector, to the dismay of tax conservatives. I evaluate under what circumstances these government subsidies make sense, paying particular attention to interjurisdictional competition. I show what governments should expect to pay when they join a bidding war and derive the expected welfare gain. The analysis looks in detail at the efforts of the Ontario and federal governments to attract new investments in the automobile sector.

Keywords: Foreign Direct Investment; government competition; subsidies; investment incentives; automobile industry; opportunity cost (search for similar items in EconPapers)
JEL-codes: H25 H23 L62 D44 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-pbe and nep-ppm
Date: 2008-11-16
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