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Informational Rents and Discretionary Industrial Assistance

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  • Wren, Colin

    (University of Newcastle upon Tyne)

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    Abstract

    The paper analyses the existence and efficiency of discretionary industrial assistance schemes under asymmetric information between an uninformed government and a uniform distribution of firms with differing productivities. Discretionary assistance allows the government to scrutinise projects in an effort to learn the type to reduce the 'informational rents' of automatic assistance, where firms take up any contract on offer. Two discretionary grant schemes are analysed, which either exclude 'non-additional' projects or reduce the assistance to the minimum necessary for a project to proceed. The paper finds the conditions under which discretionary assistance exists and is more efficient than automatic assistance.

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    File URL: http://repec.org/res2003/Wren.pdf
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    Bibliographic Info

    Paper provided by Royal Economic Society in its series Royal Economic Society Annual Conference 2003 with number 222.

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    Date of creation: 04 Jun 2003
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    Handle: RePEc:ecj:ac2003:222

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    Web page: http://www.res.org.uk/society/annualconf.asp
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    Related research

    Keywords: subsidies; asymmetric information; discretionary assistance; investment grants;

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    Cited by:
    1. Girma, Sourafel & Görg, Holger & Strobl, Eric & Walsh, Frank, 2007. "Creating Jobs Through Public Subsidies: An Empirical Analysis," IZA Discussion Papers 3168, Institute for the Study of Labor (IZA).

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