IDEAS home Printed from https://ideas.repec.org/a/tpr/jeurec/v4y2006i2-3p513-522.html
   My bibliography  Save this article

"Wasteful" Public Spending and State Aid Control

Author

Listed:
  • Mathias Dewatripont
  • Paul Seabright

Abstract

The conventional academic rationale for supranational intervention to curb state aids to industry appeals to transfrontier spillovers. However, competition policy practitioners often speak in terms of curbing "wasteful" spending, regardless of whether or not any international spillovers are involved. Although it is often argued that such wasteful spending calls not for supranational state aid control but rather for better domestic political accountability, this paper argues that wasteful spending may be a by-product of accountability, not a symptom of its absence. Specifically, we describe a model in which politicians fund projects that are wasteful as a way to signal their diligence, and voters rationally reward them for this. We discuss implications for the role of state aid control mechanisms. (JEL: D72, D78, D82, H25) (c) 2006 by the European Economic Association.

Suggested Citation

  • Mathias Dewatripont & Paul Seabright, 2006. ""Wasteful" Public Spending and State Aid Control," Journal of the European Economic Association, MIT Press, vol. 4(2-3), pages 513-522, 04-05.
    • Handle: RePEc:tpr:jeurec:v:4:y:2006:i:2-3:p:513-522
    as

    Download full text from publisher

    File URL: http://onlinelibrary.wiley.com/journal/10.1111/(ISSN)1542-4774/issues
    File Function: link to full text
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Hussein Kassim & Bruce Lyons, 2013. "The New Political Economy of EU State Aid Policy," Journal of Industry, Competition and Trade, Springer, vol. 13(1), pages 1-21, March.
    2. Hainz, Christa & Hakenes, Hendrik, 2007. "The Politician and his Banker," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 222, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    3. Pierre-André Buigues & Khalid Sekkat, 2011. "Public Subsidies to Business: An International Comparison," Journal of Industry, Competition and Trade, Springer, vol. 11(1), pages 1-24, March.
    4. Stephane Straub, 2011. "Infrastructure and Development: A Critical Appraisal of the Macro-level Literature," Journal of Development Studies, Taylor & Francis Journals, vol. 47(5), pages 683-708.
    5. CARAGANCIU Anatolie & CARARE Petru, 2014. "State Aid Within The Framework Of Competition Policy," Revista Economica, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 66(1), pages 37-44.
    6. Gabriele Gratton & Luigi Guiso & Claudio Michelacci & Massimo Morelli, 2017. "From Weber to Kafka: Political Instability and the Rise of an Inefficient Bureaucracy," EIEF Working Papers Series 1708, Einaudi Institute for Economics and Finance (EIEF), revised May 2017.
    7. Christoph Bertsch & Claudio Calcagno & Mark Le Quement, 2009. "State aid and tacit collusion," Economics Working Papers ECO2009/36, European University Institute.
    8. Marcella Nicolini & Carlo Scarpa & Paola Valbonesi, 2013. "Aiding Car Producers in the EU: Money in Search of a Strategy," Journal of Industry, Competition and Trade, Springer, vol. 13(1), pages 67-87, March.
    9. Hopp, Daniel & Kriebel, Michael, 2019. "The political economy of interregional competition for firms," Regional Science and Urban Economics, Elsevier, vol. 79(C).
    10. Aubert, Cécile & Falck, Oliver & Heblich, Stephan, . "Subsidizing National Champions: An Evolutionary Perspective," Chapters in Economics,, University of Munich, Department of Economics.
    11. Stephane Straub, 2008. "Infrastructure and Growth in Developing Countries: Recent Advances and Research Challenges," Edinburgh School of Economics Discussion Paper Series 179, Edinburgh School of Economics, University of Edinburgh.
    12. Heim, Sven & Hüschelrath, Kai & Schmidt-Dengler, Philipp & Strazzeri, Maurizio, 2017. "The impact of state aid on the survival and financial viability of aided firms," European Economic Review, Elsevier, vol. 100(C), pages 193-214.
    13. Marco Schito, 2021. "A Sectoral Approach to the Politics of State Aid in the European Union: an Analysis of the European Automotive Industry," Journal of Industry, Competition and Trade, Springer, vol. 21(1), pages 1-31, March.
    14. Karsten Mause & Friedrich Gröteke, 2017. "The Economic Approach to European State Aid Control: A Politico-Economic Analysis," Journal of Industry, Competition and Trade, Springer, vol. 17(2), pages 185-201, June.
    15. Martin Gregor & Dalibor Roháč, 2009. "The Optimal State Aid Control: No Control," Czech Economic Review, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, vol. 3(1), pages 093-113, March.
    16. Lapointe, Simon & Morand, Pierre-Henri, 2019. "Subsidy Bidding Wars and the Structure of Multi-Plant Firms," Working Papers 115, VATT Institute for Economic Research.
    17. Daniel Hopp & Michael Kriebel, 2016. "The political economy of interregional competition for firms," CQE Working Papers 5616, Center for Quantitative Economics (CQE), University of Muenster.
    18. Patrick Van Cayseele & Joep Konings & Ilona Sergant, 2014. "The effects of state aid on total factor productivity growth," Working Papers of Department of Economics, Leuven 548612, KU Leuven, Faculty of Economics and Business (FEB), Department of Economics, Leuven.
    19. de Bettignies, Jean-Etienne & Ross, Thomas W., 2009. "Public-private partnerships and the privatization of financing: An incomplete contracts approach," International Journal of Industrial Organization, Elsevier, vol. 27(3), pages 358-368, May.
    20. Giorgio Barba Navaretti & Anthony J. Venables, 2013. "Multinationals and industrial policy," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 29(2), pages 361-382, SUMMER.
    21. Hopp, Daniel & Kriebel, Michael, 2016. "The political economy of interregional competition for firms," VfS Annual Conference 2016 (Augsburg): Demographic Change 145693, Verein für Socialpolitik / German Economic Association.
    22. Alves, Amanda M. & Brousseau, Eric & Yeung, Timothy Yu-Cheong, 2021. "The dynamics of institution building: State aids, the European commission, and the court of justice of the European Union," Journal of Comparative Economics, Elsevier, vol. 49(3), pages 836-859.

    More about this item

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:tpr:jeurec:v:4:y:2006:i:2-3:p:513-522. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Kelly McDougall (email available below). General contact details of provider: https://direct.mit.edu/journals .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.