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Contribution Details

Type Working Paper
Scope Discipline-based scholarship
Title A quantitative analysis of subsidy competition in the U.S.
Organization Unit
  • Ralph Ossa
  • English
Institution National Bureau of Economic Research
Series Name NBER Working Papers
Number 20975
Number of Pages 54
Date 2019
Abstract Text I use a quantitative economic geography model to explore subsidy competition among U.S. states. I ask what motivates state governments to subsidize firm relocations and quantify how strong their incentives are. I also characterize fully non-cooperative and cooperative subsidy choices and assess how far away we are from these extremes. I find that states have strong incentives to subsidize firm relocations in order to gain at the expense of other states. I 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.
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