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State aid in the European Union: The prohibition of subsidies in an integrated market

Collie, David Robert ORCID: https://orcid.org/0000-0002-3132-648X 2000. State aid in the European Union: The prohibition of subsidies in an integrated market. International Journal of Industrial Organization 18 (6) , pp. 867-884. 10.1016/S0167-7187(98)00051-4

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Abstract

The effect of prohibiting state aid in an integrated market is analysed in a symmetric Cournot oligopoly model where one firm is located in each member state. Subsidies are financed by distortionary taxation so there is a trade-off between the deadweight loss from the oligopolistic distortion and that from distortionary taxation. It is shown that there exists a range of values for the opportunity cost of government revenue where member states want to give subsidies and where the multilateral prohibition of subsidies would increase aggregate welfare. Furthermore, this range of values is shown to include plausible estimates of opportunity cost.

Item Type: Article
Date Type: Publication
Status: Published
Schools: Business (Including Economics)
Publisher: Elsevier
ISSN: 0167-7187
Last Modified: 27 Oct 2022 08:36
URI: https://orca.cardiff.ac.uk/id/eprint/62818

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