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
© 2025. Kent A. Clark Center for Global Markets.
14%
2%
0%
5%
31%
45%
2%
Responses weighted by each expert's confidence
© 2025. Kent A. Clark Center for Global Markets.
0%
8%
29%
61%
2%
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
© 2025. Kent A. Clark Center for Global Markets.
14%
2%
0%
17%
26%
33%
7%
Responses weighted by each expert's confidence
© 2025. Kent A. Clark Center for Global Markets.
0%
23%
26%
36%
15%
Question A Participant Responses
Participant |
University |
Vote |
Confidence |
Bio/Vote History |
|---|---|---|---|---|
 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 |
|---|---|---|---|---|
|
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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