TY - JOUR
T1 - On the dynamic response of a firm to an employment subsidy with a fmd threshold
AU - Montgomery, Mark
AU - Wilson, Charles A.
N1 - Funding Information:
*This rexarch has been supported in part by a grant from the National Science Foundation and an Alfred P. Sloan Research Fellowship. ‘For a comprehensive survey of these programs, see Haveman and Cbristia.nsen (1978).
PY - 1985/12
Y1 - 1985/12
N2 - During the last two decades, policy-makers have included employment subsidies among the tools of stabilization policy. Employment subsidy programs have been introduced in Japan, Great Britain, Europe and the United States. There has been some concern, however, about the effectiveness of such programs. In this paper, we analyze how a profit-maximizing firm will respond to a marginal subsidy program with a fixed threshold, focusing on the role of inventories. We show that, in some cases, the firm may have an incentive to manipulate inventories in a way that increases its profits but lowers the cost effectiveness of the program.
AB - During the last two decades, policy-makers have included employment subsidies among the tools of stabilization policy. Employment subsidy programs have been introduced in Japan, Great Britain, Europe and the United States. There has been some concern, however, about the effectiveness of such programs. In this paper, we analyze how a profit-maximizing firm will respond to a marginal subsidy program with a fixed threshold, focusing on the role of inventories. We show that, in some cases, the firm may have an incentive to manipulate inventories in a way that increases its profits but lowers the cost effectiveness of the program.
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U2 - 10.1016/0165-1889(85)90013-2
DO - 10.1016/0165-1889(85)90013-2
M3 - Article
AN - SCOPUS:46549093613
SN - 0165-1889
VL - 9
SP - 405
EP - 422
JO - Journal of Economic Dynamics and Control
JF - Journal of Economic Dynamics and Control
IS - 4
ER -