Ralph Ossa (Chicago Booth) will present:

"A Quantitative Analysis of Subsidy Competition in the U.S."

at 12:15pm on Tuesday, May 5, 2015 in 051 Volanakis (Buchanan) TUCK

Lunch will be served at noon.


Please sign up for a meeting, or dinner at:

https://docs.google.com/spreadsheets/d/1x7yM60ductStiE88G2W_lz9ogkVKl0ShELHCQ4nuRHk/edit?usp=sharing



If you will be attending the Lunch Seminar please RSVP to Richard Rielly at TUCK so he can order the appropriate amount of food.

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Abstract


What motivates regional governments to subsidize firm relocations and what are the implications of the subsidy competition among them? In this paper, I address these questions using a quantitative economic geography model which I calibrate to U.S. states. I show that states have strong incentives to subsidize firm relocations in order to gain at the expense of other states. I also show that subsidy competition creates large distortions so that there is much to gain from a cooperative approach. Overall, I find that manufacturing real income can be up to 3.9 percent higher if states stop competing over firms.



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