Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/197713
Authors: 
Matsuzaki, Daisuke
Ono, Yoshiyasu
Year of Publication: 
2018
Series/Report no.: 
ISER Discussion Paper No. 1041
Abstract: 
When a government considers a subsidy for an underdeveloped region, it has several options: the subsidies can be for land, wages, employment, or production. While land subsidy is a lump-sum transfer, the others are meant to promote local production or worker immigration. Under full employment, replacing the lump-sum subsidy with the other subsidies benefit (harm) the recipient region if it specializes in labor-intensive (land-intensive) activities. If unemployment prevails in both the recipient and non-recipient regions, production and employment subsidies benefit, but a wage subsidy harms, the recipient region. We also analyze asymmetric cases where one region attains full employment while the other region remains underemployed.
Subjects: 
transfer
subsidies
unemployment
wage rigidity
JEL: 
F22
H71
R51
Document Type: 
Working Paper

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