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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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File URL: http://hdl.handle.net/10.1111/j.1467-9787.2011.00736.x
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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
DOI: j.1467-9787.2011.00736.x
Contact details of provider: Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-4146

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