Question A:
When local governments compete by offering subsidies to a firm that is willing to relocate, and shopping across multiple alternative areas, the firm typically captures most of value that is created via the relocation.
Responses
Responses weighted by each expert's confidence
Question B:
A federal prohibition against states and municipalities offering tax subsidies to attract specific businesses that are shopping across multiple areas to relocate would be welfare improving for the average taxpayer.
Responses
Responses weighted by each expert's confidence
Question A Participant Responses
| Participant | University | Vote | Confidence | Bio/Vote History |
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 Daron Acemoglu |
MIT | Bio/Vote History | ||
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Very hard to know the answer to this. I would find it hard to believe that they could capture all of the games, but they may capture a lot.
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 Alberto Alesina |
Harvard | Bio/Vote History | ||
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 Joseph Altonji |
Yale | Bio/Vote History | ||
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 Alan Auerbach |
Berkeley | Bio/Vote History | ||
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 David Autor |
MIT | Bio/Vote History | ||
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This seems plausible, but I have no way to know. Nether the firm nor the host government can precisely forecast what value will result.
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 Katherine Baicker |
University of Chicago | Bio/Vote History | ||
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 Abhijit Banerjee |
MIT | Bio/Vote History | ||
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Hard to imagine that there is a general rule here: there must be specific features of locations that firms value a lot in some cases
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 Marianne Bertrand |
Chicago | Bio/Vote History | ||
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 Markus Brunnermeier |
Princeton | Did Not Answer | Bio/Vote History | |
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 Raj Chetty |
Harvard | Did Not Answer | Bio/Vote History | |
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 Judith Chevalier |
Yale | Bio/Vote History | ||
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The locality should pay WTP of the 2nd highest WTP locality. W/ spillover heterogeneity, the firm shouldn't capture whole surplus.
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 David Cutler |
Harvard | Bio/Vote History | ||
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 Angus Deaton |
Princeton | Bio/Vote History | ||
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 Darrell Duffie |
Stanford | Bio/Vote History | ||
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This is a reasonable proposition, based on the "auction" that is created, but I am just not familiar enough with the setting.
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 Aaron Edlin |
Berkeley | Did Not Answer | Bio/Vote History | |
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 Barry Eichengreen |
Berkeley | Bio/Vote History | ||
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 Liran Einav |
Stanford | Bio/Vote History | ||
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Evan Mast (AEJ Applied, forthcoming) studies precisely this question
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 Ray Fair |
Yale | Bio/Vote History | ||
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This question and the next one are too open ended.
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 Amy Finkelstein |
MIT | Did Not Answer | Bio/Vote History | |
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 Austan Goolsbee |
Chicago | Bio/Vote History | ||
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 Michael Greenstone |
University of Chicago | Bio/Vote History | ||
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when subsidies tend to be largest, there are substantial benefits for firms who were there before new plant-- i.e., productivity spillovers
-see background information here |
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 Robert Hall |
Stanford | Bio/Vote History | ||
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That's what auction theory implies
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 Oliver Hart |
Harvard | Bio/Vote History | ||
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 Bengt Holmström |
MIT | Bio/Vote History | ||
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 Caroline Hoxby |
Stanford | Bio/Vote History | ||
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The best recent evidence on this question, which is well identified and can be interpreted as causal, suggests that the answer is yes.
-see background information here |
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 Hilary Hoynes |
Berkeley | Bio/Vote History | ||
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 Kenneth Judd |
Stanford | Bio/Vote History | ||
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In a competition for a once-in-a-decade opportunity, the firm will get most of the benefits. Remember Foxconn -- WI beat ILL but will lose.
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 Steven Kaplan |
Chicago Booth | Bio/Vote History | ||
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The distribution of gains depends on many factors, including competence, corruption, competition and externalities.
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 Anil Kashyap |
Chicago Booth | Bio/Vote History | ||
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Boeing, Foxconn, countless professional sports teams to give a few examples
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 Pete Klenow |
Stanford | Bio/Vote History | ||
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 Jonathan Levin |
Stanford | Bio/Vote History | ||
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Firms surely capture some surplus from this type of competition; I'm less sure about "most" and "typically".
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 Eric Maskin |
Harvard | Bio/Vote History | ||
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This is a standard instance of monopoly power on the part of the firms.
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 William Nordhaus |
Yale | Bio/Vote History | ||
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 Emmanuel Saez |
Berkeley | Bio/Vote History | ||
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 Larry Samuelson |
Yale | Bio/Vote History | ||
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 José Scheinkman |
Columbia University | Bio/Vote History | ||
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Except when a location would benefit much more from the move than all the alternative locations.
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 Richard Schmalensee |
MIT | Bio/Vote History | ||
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 Carl Shapiro |
Berkeley | Did Not Answer | Bio/Vote History | |
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 Robert Shimer |
University of Chicago | Bio/Vote History | ||
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There is substantial evidence of spillovers not captured by the firm. This is central to most theories of agglomeration.
-see background information here |
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 James Stock |
Harvard | Did Not Answer | Bio/Vote History | |
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 Richard Thaler |
Chicago Booth | Bio/Vote History | ||
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Probably true. Winners curse hurts the bidders. But nothing says the firm gets all the rents.
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 Christopher Udry |
Northwestern | Bio/Vote History | ||
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Question B Participant Responses
| Participant | University | Vote | Confidence | Bio/Vote History |
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Daron Acemoglu |
MIT | Bio/Vote History | ||
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Businesses have become too powerful; such competition is one more step in that direction. But we should think about excessive agglomeration.
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Alberto Alesina |
Harvard | Bio/Vote History | ||
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Joseph Altonji |
Yale | Bio/Vote History | ||
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Alan Auerbach |
Berkeley | Bio/Vote History | ||
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David Autor |
MIT | Bio/Vote History | ||
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On average, I suspect these agreements rip off taxpayers. There are certainly exceptions. But the expected value is probably negative
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Katherine Baicker |
University of Chicago | Bio/Vote History | ||
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Abhijit Banerjee |
MIT | Bio/Vote History | ||
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Marianne Bertrand |
Chicago | Bio/Vote History | ||
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Markus Brunnermeier |
Princeton | Did Not Answer | Bio/Vote History | |
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Raj Chetty |
Harvard | Did Not Answer | Bio/Vote History | |
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Judith Chevalier |
Yale | Bio/Vote History | ||
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David Cutler |
Harvard | Bio/Vote History | ||
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Angus Deaton |
Princeton | Bio/Vote History | ||
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Darrell Duffie |
Stanford | Bio/Vote History | ||
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Aaron Edlin |
Berkeley | Did Not Answer | Bio/Vote History | |
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Barry Eichengreen |
Berkeley | Bio/Vote History | ||
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Captures most doesn't mean captures all, so going as far as a prohibition makes me queasy.
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Liran Einav |
Stanford | Bio/Vote History | ||
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Ray Fair |
Yale | Bio/Vote History | ||
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Amy Finkelstein |
MIT | Did Not Answer | Bio/Vote History | |
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Austan Goolsbee |
Chicago | Bio/Vote History | ||
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Michael Greenstone |
University of Chicago | Bio/Vote History | ||
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where businesses maximize profits need not be the same location w largest spillovers; subsidies can increase welfare by drawing firms there
-see background information here |
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Robert Hall |
Stanford | Bio/Vote History | ||
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Local governments seem to believe in a naive jobs calculus.
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Oliver Hart |
Harvard | Bio/Vote History | ||
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Bengt Holmström |
MIT | Bio/Vote History | ||
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Caroline Hoxby |
Stanford | Bio/Vote History | ||
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The answer to this question depends on general equilibrium effects that would probably run through the political economy of tax-setting.
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Hilary Hoynes |
Berkeley | Bio/Vote History | ||
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Kenneth Judd |
Stanford | Bio/Vote History | ||
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How can a law define "shopping"? Cities subsidize stadiums because the team MIGHT get offers. Better to fix municipal bond tax rules.
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Steven Kaplan |
Chicago Booth | Bio/Vote History | ||
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Anil Kashyap |
Chicago Booth | Bio/Vote History | ||
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optimal tax code would be very different than the current one, but an arms race in subsidies seems inefficient
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Pete Klenow |
Stanford | Bio/Vote History | ||
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Jonathan Levin |
Stanford | Bio/Vote History | ||
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Probably would prevent some wasteful competition, but this seems like a pretty heavy handed regulation.
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Eric Maskin |
Harvard | Bio/Vote History | ||
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The evidence suggest that average taxpayers in winning cites lose out, so ban may help. But why cities overbid is not clear to me.
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William Nordhaus |
Yale | Bio/Vote History | ||
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Emmanuel Saez |
Berkeley | Bio/Vote History | ||
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Tax subsidies for business relocation is an aggressive form of tax competition which ought to be regulated by the central government.
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Larry Samuelson |
Yale | Bio/Vote History | ||
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José Scheinkman |
Columbia University | Bio/Vote History | ||
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Moves may produce benefits that are not captured by the firm relocating
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Richard Schmalensee |
MIT | Bio/Vote History | ||
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Carl Shapiro |
Berkeley | Did Not Answer | Bio/Vote History | |
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Robert Shimer |
University of Chicago | Bio/Vote History | ||
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Prohibiting competition across jurisdictions is Pareto inefficient. There are better ways to help the average taxpayer.
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James Stock |
Harvard | Did Not Answer | Bio/Vote History | |
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Richard Thaler |
Chicago Booth | Bio/Vote History | ||
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Guessing this would just make the competition less transparent.
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Christopher Udry |
Northwestern | Bio/Vote History | ||
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I would not be surprised to discover unanticipated consequences of an attempt to ban such competition, but it's worth trying.
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