کد مقاله | کد نشریه | سال انتشار | مقاله انگلیسی | نسخه تمام متن |
---|---|---|---|---|
969263 | 1479466 | 2012 | 8 صفحه PDF | دانلود رایگان |

Politicians should spend money as efficiently as possible. But what is the best method of granting state aid to firms? We use a theoretical model with firms that differ in their success probabilities and compare different types of direct subsidies with indirect subsidies through bank loans. We find that, for a large range of parameters, subsidies through banks entail higher social welfare than direct subsidies, avoiding windfall gains to entrepreneurs and economizing on screening costs. For selfish politicians, subsidizing a bank has the additional advantage that part of the screening costs are born by private banks. Consequently, from a welfare perspective, politicians use subsidized banks inefficiently often.
► When firms generate positive externalities, politicians want to subsidize.
► Under hidden information, politicians cannot distinguish who needs the subsidy.
► Bankers have the ability to assess firm quality, at a cost. They can generate information that politicians lack.
► The efficient form of intervention is often an indirect subsidy to firms through bank loans.
► From a welfare perspective, politicians use subsidized loans too often.
Journal: Journal of Public Economics - Volume 96, Issues 1–2, February 2012, Pages 218–225