Is subsidizing entry an optimal policy?

Subsidizing Multinational Corporations: Is That a Development Policy?

Foreign direct investment (FDI) is a major factor in the globalization scenario. However, contrary to the core pro-market tenets of the economic school supporting globalization, the flows of FDI have grown side by side with a whole array of FDI subsidies dispensed by the “visible hand” of the state. Scholars have studied the links between FDI and economic growth and between subsidies and actual...

Subsidizing the National Food Authority : Is It a Good Policy ?

Optimal Stabilization Policy with Endogenous Firm Entry

We study optimal monetary stabilization policy in a dynamic stochastic general equilibrium model where money is essential for trade and …rm entry is endogenous. We do so when all prices are ‡exible and also when some are sticky. Due to an externality a¤ecting …rm entry, the central bank deviates from the Friedman rule. Calibration exercises suggest that the nominal interest rate should have bee...

Optimal Monetary Policy and Firm Entry

This paper characterises optimal monetary policy in an economy with endogenous …rm entry, a cash-in-advance constraint and preset wages. Firms must make pro…ts to cover entry costs; thus the markup on goods prices is e¢cient. However, because leisure is not priced at a markup, the consumption-leisure tradeo¤ is distorted. Consequently, the real wage, hours and production are suboptimally low. D...

Subsidizing Start-Ups: Policy Targeting and Policy Effectiveness

Start-up subsidies are a frequently employed policy instrument, the use of which is justified by alleged market failure resulting from positive external effects and capital market imperfections. This article investigates whether the allocation of subsidies reflects a policy focus on addressing these market failure occurrences. However, using survey data from the East German state of Thuringia, ...