Playing by the new subsidy rules: capital subsidies as substitutes for sectoral subsidies

• 成果类型: Article
• 署名作者: Lovely, ME
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/S0022-1996(96)01474-2
• 发表日期: 1997
• 页码: 463-482
• 关键词: factor subsidies; capital mobility; increasing returns

摘要

In a small, open economy characterized by an increasing-returns sector and foreign-owned capital, a sector-specific instrument generally is needed to achieve the optimum. A capital subsidy alone can be used for decentralization, however, when the optimal production plan is specialization in the externality-generating activity. The effect of a capital subsidy on home income and its distribution depends on the pattern of production and the share of domestic capital that is foreign owned. In a diversified economy, a subsidy benefits capital owners, harms labor and raises national income only if foreign capital ownership is sufficiently small. In a specialized economy, a subsidy may raise national income even if all domestic capital is foreign owned and, if it does, both labor and capital owners gain. Thus, a capital subsidy may be an attractive replacement for sector-specific subsidies proscribed by international agreements.