The silver lining of red tape

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Title: The silver lining of red tape
Authors: Davies, Ronald B.
Permanent link: http://hdl.handle.net/10197/2652
Date: May-2010
Abstract: An increasing number of international agreements require “nondiscrimination” from their participants, i.e. the government of one country cannot treat foreign firms differently from domestic firms. This is at odds with a government’s desire to benefit its own citizens rather than foreign citizens. I show that the use of red tape – a wasteful application process – can achieve de-facto discrimination. Key to this result is firm heterogeneity since, although the red tape cost is constant across firms, only those sufficiently benefiting from an incentive program will find it worth the cost of applying. If the benefits of targeting subsidies outweigh the burden of red tape on domestic firms, red tape will be used.
Funding Details: Not applicable
Type of material: Working Paper
Publisher: University College Dublin. School of Economics
Keywords: Red tape;Firm heterogeneity;Production subsidies;Discrimination
Subject LCSH: Trade regulation
Subsidies
International business enterprises
Barriers to entry (Industrial organization)
Language: en
Status of Item: Not peer reviewed
Appears in Collections:Economics Working Papers & Policy Papers

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