A quantitative analysis of subsidy competition in the U.S

Alessandro Ferrari and Ralph Ossa

Journal of Public Economics, 2023, vol. 224, issue C

Abstract: We use a quantitative economic geography model to explore subsidy competition among U.S. states. We ask what motivates state governments to subsidize firm relocations and quantify how strong their incentives are. We also characterize fully non-cooperative and cooperative subsidy choices and assess how far away we are from these extremes. We find that states have strong incentives to subsidize firm relocations in order to gain at the expense of other states. We 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.

Keywords: Optimal subsidies; Subsidy competition; Location choice (search for similar items in EconPapers)
JEL-codes: F12 F13 R12 R58 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pubeco:v:224:y:2023:i:c:s0047272723001019

DOI: 10.1016/j.jpubeco.2023.104919

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