Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/314214 
Year of Publication: 
2023
Citation: 
[Journal:] Journal of Applied Economics [ISSN:] 1667-6726 [Volume:] 26 [Issue:] 1 [Article No.:] 2160897 [Year:] 2023 [Pages:] 1-19
Publisher: 
Taylor & Francis, Abingdon
Abstract: 
Local governments often provide tax-subsidy programs to attract corporate investment. Using a game-theoretic real options model between a firm and a government, this paper aims to explore the interaction between the government's tax-subsidy policy and the firm's investment and financing decisions. The optimal incentive policies are derived for cooperative and non-cooperative bargaining settings between a government and a firm. We show that it is optimal for the government to offer a tax-subsidy combination in the cooperative setting. However, this is not true for the non-cooperative setting, in which the optimal policy is to only levy taxes with no investment subsidy. Whereas firms always have an incentive to rely on debt financing in the non-cooperative setting, firms are reluctant to issue debt in the cooperative setting. Finally, it is generally optimal for the government to collect taxes at a lower rate in the case of high risk high-tech enterprises.
Subjects: 
cooperative game
investment subsidy
non-cooperative game
Taxes
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.