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Antiagglomeration Subsidies With Heterogeneous Firms

  • Toshihiro Okubo

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

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Article provided by Wiley Blackwell in its journal Journal of Regional Science.

Volume (Year): 52 (2012)
Issue (Month): 2 (05)
Pages: 285-299

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Handle: RePEc:bla:jregsc:v:52:y:2012:i:2:p:285-299
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  25. Toshihiro Okubo & Vincent Rebeyrol, 2006. "Home Market Effect and Regulation Costs - Homogeneous Firm and Heterogeneous Firm Trade Models," IHEID Working Papers 02-2006, Economics Section, The Graduate Institute of International Studies.
  26. 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.
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