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- Title
Government Support of Investment Projects in the Private Sector: A Microeconomic Approach.
- Authors
Galai, Dan; Wiener, Zvi
- Abstract
We examine government decisions on subsidizing investments in the private sector and discriminating among firms in its support programs. By taxing corporate profits, the government may affect corporate investment decisions, causing firms to invest less than what would be socially optimal. Investments that are desirable from the standpoint of social welfare may be rejected by shareholders, which may ultimately lead to the collection of, fewer taxes. We analyze the conditions for optimal subsidies for investments carried out by the private sector. We find that high-risk ventures that generate substantial spillover activity are prime candidates for government incentive schemes.
- Subjects
SUBSIDIES; INVESTMENTS; PRIVATE sector; CORPORATE profits; CHARITIES; STOCKHOLDERS
- Publication
Financial Management (Wiley-Blackwell), 2003, Vol 32, Issue 3, p33
- ISSN
0046-3892
- Publication type
Article
- DOI
10.2307/3666382