Industrial Blackmail: Dynamic Tax Competition and Public Investment
AbstractA dynamic model of intergovernmental competition for a large plant is presented, when local productivity is uncertain. One firm determines the location of its plant in each period by conducting an auction, soliciting bids from local governments. Equilibrium subsidies from the local governments are derived. The author also consider a two-stage game where local governments first choose a level of costly infrastructure then participate in the sequential auction. Even when costs are identical across locations, investing in different levels of infrastructure is a Nash equilibrium. Moreover, when infrastructure is endogenous in this manner, it is chosen efficiently.
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Bibliographic InfoArticle provided by Canadian Economics Association in its journal Canadian Journal of Economics.
Volume (Year): 26 (1993)
Issue (Month): 3 (August)
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Postal: Canadian Economics Association Prof. Steven Ambler, Secretary-Treasurer c/o Olivier Lebert, CEA/CJE/CPP Office C.P. 35006, 1221 Fleury Est Montréal, Québec, Canada H2C 3K4
Web page: http://economics.ca/cje/
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