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Anti-agglomeration Subsidies with Heterogeneous Firms

Toshihiro Okubo ()

No DP2011-11, Discussion Paper Series from Research Institute for Economics & Business Administration, Kobe University

Abstract: This paper studies anti-agglomeration subsidies in a core-periphery setting when firms are heterogeneous in labour productivity, focusing on the effects of relocation subsidy on firm location in various tax-financing schemes (local versus global). We discuss how subsidy can enhance welfare in periphery. As a result we find that subsidy proportional to profits can induce the relocation of high productivity firms and that a subsidy can increase welfare in periphery. Concerning tax-financing schemes, local tax financing scheme has an optimal level of subsidy.

Keywords: Heterogeneous firms; Anti-agglomeration relocation subsidy; Global/local tax-financing scheme (search for similar items in EconPapers)
JEL-codes: F21 H32 H25 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-geo and nep-ure
Date: 2011-03
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https://www.rieb.kobe-u.ac.jp/academic/ra/dp/English/DP2011-11.pdf First version, 2011 (application/pdf)

Related works:
Journal Article: ANTIAGGLOMERATION SUBSIDIES WITH HETEROGENEOUS FIRMS (2012) Downloads
Working Paper: Anti-agglomeration Subsidies with Heterogeneous Firms (2011) Downloads
Working Paper: Anti-agglomeration Subsidies with Heterogeneous Firms (2006) Downloads
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