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Discussion Papers In Economics And Business. 2017, 14-07, p. 1-41

Subsidy competition, imperfect labor markets,and the endogenous entry of firms

Graduate School of Economics and Osaka School of International Public Policy (OSIPP), Osaka University

英語

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2017-03

http://www2.econ.osaka-u.ac.jp/library/global/dp/1707.pdf

This paper constructs a model of subsidy competition for manufacturing rms under labor market imperfections. Because subsidies a¤ect the distribution of rms, they in uence unemployment rates, the number of fi rms, and welfare. In our model, governments always provide inefficiently high subsidy rates to manufacturing fi rms. When labor market frictions are high, subsidy competition is bene cial, although subsidies under subsidy competition are inefficiently high. We show that an increase in labor market frictions always lowers welfare, whereas trade liberalization always improves welfare. Finally, we find that a rise in labor market friction in a country raises the equilibrium subsidy rate, affects unemployment rates, and lowers welfare.

60701

Subsidy competition, imperfect labor markets,and the endogenous entry of firms

Graduate School of Economics and Osaka School of International Public Policy (OSIPP), Osaka University

英語

2017-03

Discussion Papers In Economics And Business

14-07

1

41

https://hdl.handle.net/11094/60701

http://www2.econ.osaka-u.ac.jp/library/global/dp/1707.pdf