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Anti-agglomeration Subsidies with Heterogeneous Firms

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  • Toshihiro Okubo

    (Research Institute for Economics & Business Administration (RIEB), Kobe University, Japan)

Abstract

This paper studies anti-agglomeration subsidies in a core-periphery setting when firms are heterogeneous in labour productivity, focusing on the effects of relocation subsidy on firm location in various tax-financing schemes (local versus global). We discuss how subsidy can enhance welfare in periphery. As a result we find that subsidy proportional to profits can induce the relocation of high productivity firms and that a subsidy can increase welfare in periphery. Concerning tax-financing schemes, local tax financing scheme has an optimal level of subsidy.

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File URL: http://www.rieb.kobe-u.ac.jp/academic/ra/dp/English/DP2011-11.pdf
File Function: First version, 2011
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Bibliographic Info

Paper provided by Research Institute for Economics & Business Administration, Kobe University in its series Discussion Paper Series with number DP2011-11.

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Length: 26 pages
Date of creation: Mar 2011
Date of revision:
Handle: RePEc:kob:dpaper:dp2011-11

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Keywords: Heterogeneous firms; Anti-agglomeration relocation subsidy; Global/local tax-financing scheme;

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References

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  1. Richard Baldwin & Toshihiro Okubo, 2009. "Tax reform, delocation and heterogeneous firms," NBER Working Papers 15109, National Bureau of Economic Research, Inc.
  2. Toshihiro Okubo & Eiichi Tomiura, 2010. "Industrial relocation policy and heterogeneous plants sorted by productivity: Evidence from Japan," Discussion Paper Series, Research Institute for Economics & Business Administration, Kobe University DP2010-35, Research Institute for Economics & Business Administration, Kobe University.
  3. K.H. Midelfart & H.G. Overman & S.J. Redding & A.J. Venables, 2000. "The location of European industry," European Economy - Economic Papers, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission 142, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
  4. Martin, Philippe & Mayer, Thierry & Mayneris, Florian, 2011. "Public support to clusters: A firm level study of French "Local Productive Systems"," Regional Science and Urban Economics, Elsevier, vol. 41(2), pages 108-123, March.
  5. Mohl, P. & Hagen, T., 2010. "Do EU structural funds promote regional growth? New evidence from various panel data approaches," Regional Science and Urban Economics, Elsevier, vol. 40(5), pages 353-365, September.
  6. Dupont, Vincent & Martin, Philippe, 2003. "Subsidies to Poor Regions and Inequalities: Some Unpleasant Arithmetic," CEPR Discussion Papers 4107, C.E.P.R. Discussion Papers.
  7. Okubo, Toshihiro, 2009. "Trade liberalisation and agglomeration with firm heterogeneity: Forward and backward linkages," Regional Science and Urban Economics, Elsevier, vol. 39(5), pages 530-541, September.
  8. Karen Helene Midelfart-Knarvik & Henry G. Overman, 2002. "Delocation and European integration: is structural spending justified?," Economic Policy, CEPR;CES;MSH, CEPR;CES;MSH, vol. 17(35), pages 321-359, October.
  9. Richard E. Baldwin & Toshihiro Okubo, 2006. "Heterogeneous firms, agglomeration and economic geography: spatial selection and sorting," Journal of Economic Geography, Oxford University Press, vol. 6(3), pages 323-346, June.
  10. Martin, Philippe & Rogers, Carol Ann, 1994. "Industrial Location and Public Infrastructure," CEPR Discussion Papers 909, C.E.P.R. Discussion Papers.
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Cited by:
  1. Okubo, Toshihiro & Tomiura, Eiichi, 2012. "Industrial relocation policy, productivity and heterogeneous plants: Evidence from Japan," Regional Science and Urban Economics, Elsevier, vol. 42(1-2), pages 230-239.
  2. Lionel Fontagné & Pamina Koenig & Florian Mayneris & Sandra Poncet, 2013. "Cluster Policies and Firm Selection: Evidence from France," PSE - Labex "OSE-Ouvrir la Science Economique", HAL hal-00975554, HAL.

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