Selection, Trade, and Employment: The Strategic Use of Subsidies

Hassan Molana and Catia Montagna

No 296, Dundee Discussion Papers in Economics from Economic Studies, University of Dundee

Abstract: We study how the interaction between economic openness and competitive selection affects the effectiveness of employment and entry subsidisation. Within a heterogeneous-firms model with endogenous labour supply, optimal employment subsidies are shown to have pro- or anti-competitive effects on industry selection depending on whether the economy is open or not. Selection effects resulting from international competition and fiscal externalities imply that non-cooperative policies may entail under-subsidisation of employment. Entry subsidies always have pro-competitive selection effects on the industry, but are shown to be less effective in raising employment and welfare than employment subsidies.

Keywords: optimal policy; employment subsidies; competitive selection; international trade (search for similar items in EconPapers)
JEL-codes: E61 F12 F42 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2016-10
New Economics Papers: this item is included in nep-int and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.dundee.ac.uk/media/dundeewebsite/econom ... cussion/DDPE_296.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.dundee.ac.uk/media/dundeewebsite/economicstudies/documents/discussion/DDPE_296.pdf [301 Moved Permanently]--> https://www.dundee.ac.uk/media/dundeewebsite/economicstudies/documents/discussion/DDPE_296.pdf)

Related works:
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: https://EconPapers.repec.org/RePEc:dun:dpaper:296

Access Statistics for this paper

More papers in Dundee Discussion Papers in Economics from Economic Studies, University of Dundee Contact information at EDIRC.
Bibliographic data for series maintained by Andrzej Kwiatkowski ().