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The Political Economy of State Government Subsidy Adoption: The Case of Ethanol

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  • Mark Skidmore
  • Chad Cotti
  • James Alm

Abstract

In this paper we examine the factors that determine the adoption of state economic development incentives in the ethanol industry. We compile data on the implementation dates for subsidies/tax credits for all states for years 1984-2007, a period that covers the complete emergence of the biofuel industry in the United States and that was characterized by the passage of a numerous of state-level subsidies and tax breaks aimed at increasing ethanol production. Using Cox proportional hazard regression analysis, we find that states are more likely to adopt ethanol subsidies when corn production is high, when corn prices are low and gasoline prices are high, when a state is affiliated with the National Corn Growers Association, when a check-off is present, and when state government is under the control of Democrats.
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  • Mark Skidmore & Chad Cotti & James Alm, 2013. "The Political Economy of State Government Subsidy Adoption: The Case of Ethanol," Economics and Politics, Wiley Blackwell, vol. 25(2), pages 162-180, July.
    • Handle: RePEc:bla:ecopol:v:25:y:2013:i:2:p:162-180
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    File URL: http://hdl.handle.net/10.1111/ecpo.12008
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    2. Kärnä, Anders & Karlsson, Johan & Engberg, Erik & Svensson, Peter, 2020. "Political Failure: A Missing Piece in Innovation Policy Analysis," Working Paper Series 1334, Research Institute of Industrial Economics, revised 21 Apr 2022.

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    More about this item

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue

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