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Bidding for Investment Projects: Smart Public Policy or Corporate Welfare?

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  • Johannes Van Biesebroeck

Abstract

Recently, several governments in Canada have shown an increased willingness to subsidize private investment projects, especially in the manufacturing sector, to the dismay of tax conservatives. I evaluate under what circumstances these government subsidies make sense, paying particular attention to interjurisdictional competition. I show what governments should expect to pay when they join a bidding war and derive the expected welfare gain. The analysis looks in detail at the efforts of the Ontario and federal governments to attract new investments in the automobile sector.

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Bibliographic Info

Article provided by University of Toronto Press in its journal Canadian Public Policy.

Volume (Year): 36 (2010)
Issue (Month): s1 (April)
Pages: 31-48

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Handle: RePEc:cpp:issued:v:36:y:2010:i:s1:p:31-48

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  1. Michael Greenstone & Richard Hornbeck & Enrico Moretti, 2008. "Identifying Agglomeration Spillovers: Evidence from Million Dollar Plants," Working Paper Series, The Rimini Centre for Economic Analysis 36-08, The Rimini Centre for Economic Analysis, revised Jan 2008.
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  10. Holmes, Thomas J., 1999. "How Industries Migrate When Agglomeration Economies Are Important," Journal of Urban Economics, Elsevier, vol. 45(2), pages 240-263, March.
  11. Moretti, Enrico, 2004. "Bidding for Industrial Plants: Does Winning a 'Million Dollar Plant' Increase Welfare?," Santa Cruz Department of Economics, Working Paper Series qt5cz0h23t, Department of Economics, UC Santa Cruz.
  12. Edward L. Glaeser, 2001. "The Economics of Location-Based Tax Incentives," Harvard Institute of Economic Research Working Papers, Harvard - Institute of Economic Research 1932, Harvard - Institute of Economic Research.
  13. Black, Dan A & Hoyt, William H, 1989. "Bidding for Firms," American Economic Review, American Economic Association, American Economic Association, vol. 79(5), pages 1249-56, December.
  14. Neven, Damien & Siotis, Georges, 1993. "Foreign Direct Investment in the European Community: Some Policy Issues," Oxford Review of Economic Policy, Oxford University Press, Oxford University Press, vol. 9(2), pages 72-93, Summer.
  15. Milgrom, Paul & Roberts, John, 1990. "The Economics of Modern Manufacturing: Technology, Strategy, and Organization," American Economic Review, American Economic Association, American Economic Association, vol. 80(3), pages 511-28, June.
  16. Barros, Pedro P & Cabral, Luis, 2000. "Competing for Foreign Direct Investment," Review of International Economics, Wiley Blackwell, vol. 8(2), pages 360-71, May.
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