Who Provides the Most Investment Incentives: EU vs. US

Abstract

Competing for Capital concluded that the EU’s state aid policy was largely successful in its goals of controlling subsidies in general, and subsidies likely to go to mobile investment in particular. One then-recent development was the adoption of the Multi-Sectoral Framework, which for the first time specifically addressed investment incentives. Now over ten years old and incorporated into the EU’s regional aid guidelines, it is necessary to ask if it really has affected the incentives received by large investors. The strategy of this chapter will be to compare both the largest incentives and aggregate incentives (to the extent it can be estimated) in the EU and the US. Preliminary work (Wishlade, 2008a) suggests that the EU has indeed lowered incentives relative to those in the US, but I propose to calculate US incentives on a net present value basis as the EU does, and to compare the aid intensities (incentive as percentage of investment, incentive per job) in both regions.