This paper analyses tax competition between two countries of unequal size trying to attract a foreign-owned monopolist. When regional governments have only a lump-sum profit tax (subsidy) at their disposal, but face exogenous and identical transport costs for imports, then both countries will...

We estimate the effect on economic development of China's industrial policy, in particular, the establishment of Special Economic Zones (SEZ). We use data from a panel of 276 Chinese cities and prefectures from 1988 to 2010. Our difference-in-difference estimator exploits the variation in the...

We study the effects of the car scrapping subsidies in Europe during the financial crisis. We make use of a rich data set of all car models sold in nine European countries, observed at a monthly level during 2005-2011. We employ a difference-in-differences approach, exploiting the fact that...

Business support policies designed to raise productivity and employment are common worldwide, but rigorous micro-econometric evaluation of their causal effects is rare. We exploit multiple changes in the area-specific eligibility criteria for a major program to support manufacturing jobs...

The debate on trade and growth increasingly focuses on the composition of exports. Exports of more "sophisticated" products appear to be positively correlated with growth, and upgrading the quality of exports is high on the policy agenda of many countries. This study presents evidence suggesting...

Our concern is about a firm-specific industrial policy. When R&D subsidies or taxes are differentiated among firms, the question arises which firms in an industry should receive such support. We analyse a situation where firms differ in their R&D technologies in two distinct ways: they differ...

Government policies designed to give domestic exporters a strategic advantage in world markets are completely effective only if the government can commit to those policies for as long as they affect firms' decisions. Export subsidies or other output policies that affect firms only in the current...

Two central results in the strategic trade literature are that governments shall support winners and that there is a policy prisoner dilemma in international subsidy wars (i.e. countries have incentives to support local firms but they would be better off by cooperating to not intervene). We show...

A finite number of sellers (n) compete in schedules to supply an elastic demand. The costs of the sellers have uncertain common and private value components and there is no exogenous noise in the system. A Bayesian supply function equilibrium is characterized; the equilibrium is privately...

This Paper presents an empirical study of the effect of foreign multinational companies on the development of indigenous firms in the host country. Our starting point is a recent paper by Markusen and Venables (1999) that shows formally that multinationals, through the creation of linkages with...