EconPapers    
Economics at your fingertips  
 

The Politician and his Banker

Hendrik Hakenes and Christa Hainz

No 2008_01, Discussion Paper Series of the Max Planck Institute for Research on Collective Goods from Max Planck Institute for Research on Collective Goods

Abstract: Should the European Union grant state aid through an institution like the European Investment bank? This paper evaluates the efficiency of different measures for grant-ing state aid. We use a theoretical model with firms that differ in their creditworthiness and compare different types of subsidies with indirect subsidization through public banks. We find that, in a large parameter range, the politician prefers public banks to direct subsidies because they avoid windfall gains to entrepreneurs and they econo-mize on screening costs. For similar reasons, they may increase social welfare rela-tive to subsidies. One important prerequisite for this result is that public banks must not be allowed to fully compete with private banks. However, from a welfare perspec-tive, a politician uses public banks inefficiently often.

Keywords: property right; non-linear pricing; pure bundling; club good; cross-subsidisation; packet switched telephony (search for similar items in EconPapers)
JEL-codes: G21 G38 H25 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2008-01
New Economics Papers: this item is included in nep-ban and nep-cfn
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed

Downloads: (external link)
http://www.coll.mpg.de/pdf_dat/2008_01online.pdf (application/pdf)

Related works:
Working Paper: The Politician and his Banker (2007) Downloads
Working Paper: The Politician and his Banker (2007) Downloads
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:mpg:wpaper:2008_1

Access Statistics for this paper

More papers in Discussion Paper Series of the Max Planck Institute for Research on Collective Goods from Max Planck Institute for Research on Collective Goods Contact information at EDIRC.
Bibliographic data for series maintained by Marc Martin ().

 
Page updated 2024-02-27
Handle: RePEc:mpg:wpaper:2008_1