TY  - BOOK
AU  - Exbrayat,Nelly
AU  -  Gaigné,Carl
AU  -  Riou,Stéphane
TI  - Trade Integration and the Destination of Subsidies
PY  - 2010///.
							
N1  - 56
N2  - In this paper, we will develop a model of trade and localization, with two countries which differ in productivity levels. Public spending has two possible outcomes: a direct subsidy to immobile households or a wage subsidy to mobile firms. We will show how at the subsidies equilibrium, the country with the higher level of productivity provides firms with a lower after-tax subsidy. Despite this less generous policy, the former country can host a larger share of firms such that its total spending can be higher than in the low-productivity country when trade costs are low enough. Welfare analysis suggests that the second-best optimum requires an increase in subsidy to households in both countries when the economies are weakly integrated, or that the productivity gap is low, and alternatively, a significant portion of capital owners reside outside both economies
UR  - https://shs.cairn.info/journal-recherches-economiques-de-louvain-2009-4-page-407?lang=en&redirect-ssocas=7080
ER  -