A Corporate Buy-American Subsidy and Firm Location Decision
نویسندگان
چکیده
This paper investigates the impact of two Wal-Mart buy-American initiatives implemented in 1989 and abolished in 1992. Utilizing the data of a hat firm facing the choice of domestic production or losing all Wal-Mart sales, we formulated a model of the firm location decision given a subsidy. From this model, we were able to determine the necessary subsidy amount to induce a firm to produce domestically given various initial conditions. Given the market power of Wal-Mart, we then considered the possibility that the Wal-Mart buy-American initiatives had an aggregate effect on United States imports. We formulated many regression models considering the possibilities of autocorrelation, cross sectional variation in growth rates spuriously correlated with the policy, aggregate shocks across all products, and all cases occurring simultaneously. Overall, the regressions yielded negative coefficients of the buy-American policy suggesting a decline in the growth rates of imports; however, all results were statistically insignificant .
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