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Anti-agglomeration Subsidies with Heterogeneous Firms

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  • Toshihiro Okubo

    (Keio University, Department of Economics)

Abstract

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.

Suggested Citation

  • Toshihiro Okubo, 2011. "Anti-agglomeration Subsidies with Heterogeneous Firms," Keio/Kyoto Joint Global COE Discussion Paper Series 2011-012, Keio/Kyoto Joint Global COE Program.
    • Handle: RePEc:kei:dpaper:2011-012
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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. repec:hal:pseose:hal-00975554 is not listed on IDEAS
    3. Jonathan Eberle & Thomas Brenner, 2016. "More bucks, more growth, more justice? The effects of regional structural funds on regional economic growth and convergence in Germany," Working Papers on Innovation and Space 2016-01, Philipps University Marburg, Department of Geography.
    4. repec:nbp:nbpbik:v:47:y:2016:i:6:p:463-494 is not listed on IDEAS
    5. Hisamitsu Saito, 2015. "Firm Heterogeneity, Multiplant Choice, And Agglomeration," Journal of Regional Science, Wiley Blackwell, vol. 55(4), pages 540-559, September.

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    More about this item

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies

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