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Bidding for Investment Projects: Smart Public Policy or Corporate Welfare?

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  • Johannes Van Biesebroeck

Abstract

Recently, several governments in Canada have shown an increased willingness to subsidize private investment projects, especially in the manufacturing sector, to the dismay of tax conservatives. I evaluate under what circumstances these government subsidies make sense, paying particular attention to interjurisdictional competition. I show what governments should expect to pay when they join a bidding war and derive the expected welfare gain. The analysis looks in detail at the efforts of the Ontario and federal governments to attract new investments in the automobile sector.
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Suggested Citation

  • Johannes Van Biesebroeck, 2010. "Bidding for Investment Projects: Smart Public Policy or Corporate Welfare?," Canadian Public Policy, University of Toronto Press, vol. 36(s1), pages 31-48, April.
    • Handle: RePEc:cpp:issued:v:36:y:2010:i:s1:p:31-48
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    1. Johannes Van Biesebroeck & Aamir Hashmi, 2007. "Market Structure and Innovation: A Dynamic Analysis of the Global Automobile Industry," 2007 Meeting Papers 362, Society for Economic Dynamics.
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    1. Hyun-Ju Koh & Ferdinand Mittermaier, 2009. "The winner gives it all: Unions, tax competition and offshoring," Working Papers 079, Bavarian Graduate Program in Economics (BGPE).

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    More about this item

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • L62 - Industrial Organization - - Industry Studies: Manufacturing - - - Automobiles; Other Transportation Equipment; Related Parts and Equipment
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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