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Informational Rents and Discretionary Industrial Assistance

Author

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  • Wren, Colin

    (University of Newcastle upon Tyne)

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.

Suggested Citation

  • Wren, Colin, 2003. "Informational Rents and Discretionary Industrial Assistance," Royal Economic Society Annual Conference 2003 222, Royal Economic Society.
    • Handle: RePEc:ecj:ac2003:222
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    Cited by:

    1. Girma, Sourafel & Görg, Holger & Strobl, Eric & Walsh, Frank, 2008. "Creating jobs through public subsidies: An empirical analysis," Labour Economics, Elsevier, vol. 15(6), pages 1179-1199, December.

    More about this item

    Keywords

    subsidies; asymmetric information; discretionary assistance; investment grants;
    All these keywords.

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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