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Ralph Ossa, Zurich University Print
Tuesday, 13 March 2018, 14:00 - 15:15

Ralph Ossa, University of Zurich

A Quantitative Analysis of Subsidy Competition in the US

Abstract: I use a quantitative economic geography model to explore subsidy competition among U.S. states. I ask what motivates state governments to subsidize firm relocations and quantify how strong their incentives are. I also characterize fully non-cooperative and cooperative subsidy choices and assess how far away we are from these extremes. I find that states have strong incentives to subsidize firm relocations in order to gain at the expense of other states. I also find that observed subsidies are closer to cooperative than non-cooperative subsidies but the potential losses from an escalation of subsidy competition are large. 

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