Score contribution per author:
α: calibrated so average coauthorship-adjusted count equals average raw count
This paper analyzes the effect of different regional subsidies to poor regions on industrial location, employment, income inequality and welfare in the presence of agglomeration forces when firms are mobile. The impact on location of such subsidies is stronger when trade costs are low. With mobile capital, regional subsidies such as tax breaks in the poor region lead to higher profits for firms in both regions. If financed at the national level, such subsidies given to firms in the poor region increase inequality between and within regions. Finally, with relocation costs, such regional subsidies may hurt the poor region. Copyright 2006, Oxford University Press.