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Simulating the efficiencies of alternative industry location subsidies in Korea (English)

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  • Simulating the efficiencies of alternative industry location subsidies in Korea (English)
  • Murry, Michael
  • World Bank (WB)


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Title Simulating the efficiencies of alternative industry location subsidies in Korea (English)
Similar Titles
Material Type Reports
Author(English)

Murry, Michael

Publisher

World Bank (WB)

Date 1985
Language English
File Type Link
Subject Social Development < Education

Abstract

The Korean government, like many others in less developed countries, uses numerous carrots and sticks to influence the location choices of manufacturing firms. We develop an analytical model for comparing the economic efficiencies of alternative subsidy schemes, allowing for both input price subsidies and subsidies through public infrastructure investment. Simulations for nine Korean manufacturing industries compare loan guarantee plans, land price subsidies, wage bill subsidies, and infrastructure delivery schemes. We find that the credit rationing policies of the Korean government make the most common and most popular location subsidy mechanism, loan guarantees, the most efficient as well. However, we further find that if the Korean government alters its credit rationing policies, location subsidy plans that lower the price of capital to firms would become the least efficient mechanism for inducing firms to move. Finally, we find that wage bill subsidies, which are not much used by the Korean government, are more efficient than the land price subsidies which are frequently granted.