Abstract
This paper focuses on the question of the effectiveness of subsidies to private and public investment, which are a key component of European regional policy. Given mixed findings from empirical studies, it is worth studying this issue in a simulation model, where the results can be traced back to policy shocks and model assumptions. To this end, the paper employs a multiregional dynamic framework with a perfectly integrated capital market. It is found that investment subsidies are effective and capital market spillover effects are small. The argument is illustrated by numerical simulations of actual investment subsidies to the European Union regions.
| Original language | English |
|---|---|
| Journal | Regional Studies |
| Volume | 54 |
| Issue number | 9 |
| Pages (from-to) | 1262-1274 |
| Number of pages | 13 |
| ISSN | 0034-3404 |
| DOIs | |
| Publication status | Published - 2020 |
Funding
An earlier version of this paper was published as TU Dresden CEPIE Working Paper No. 02/18 (http://nbn-resolving.de/urn:nbn:de:bsz:14-qucosa-235416). The authors are grateful to d?Artis Kancs for sharing with them the DG Regio data on regional subsidies; and to Claudia Baranzelli and Olga Ivanova for comments made on an earlier draft of this paper. Henning Meier provided excellent research support. The authors acknowledge the valuable input of the three anonymous referees that helped to improve this paper.
Keywords
- European Union regional policy
- forward-looking dynamics
- interregional capital flows
- investment subsidies
- semi-endogenous growth
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