Borck, Rainald; Koh, Hyun-Ju; Pflüger, Michael - 2009
This paper shows that subsidy competition may be efficiency enhancing. We model a subsidy game among two asymmetric … subsidy competition, starting from an equilibrium where the industry core is inefficiently locked in to the smaller region …. When regions weigh workers' and capitalists' welfare equally, the core region will set its subsidy low enough that the …
