A Simple Model of Corporate Bailouts in a Globalized Economy
- Exbrayat, Nelly Université de Lyon
- Madiès, Thierry University of Fribourg
- Riou, Stéphane Université de Lyon
-
2020
Published in:
- Scandinavian Journal of Economics. - Wiley. - 2020, vol. 122, no. 4, p. 1575-1605
English
This paper explores how globalization influences the decision of governments to rescue inefficient domestic firms when bailouts affect firms’ markups. We develop a model of international trade where immobile domestic enterprises (DOEs) compete with foreign enterprises (FOEs) in an oligopolistic market. The decision to bail out DOEs leads to lower corporate tax revenues if FOEs are immobile whereas tax revenues might increase if FOEs are mobile. Interestingly, the mobility of FOEs makes governments more prone to rescue inefficient domestic firms because tax competition reduces the opportunity cost of a bailout policy in terms of public good provision.
- Faculty
- Faculté des sciences économiques et sociales et du management
- Department
- Département d'économie politique
- Language
-
- English
- Classification
- Economics
- License
- License undefined
- Identifiers
-
- RERO DOC 333222
- DOI 10.2139/ssrn.3360437
- DOI 10.1111/sjoe.12397
- Persistent URL
- https://folia.unifr.ch/unifr/documents/309533
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