Question A:
Loosening regulations on state aid to allow targeted incentives for companies in certain sectors will substantially improve the EU’s relative attractiveness for corporate investment.
Responses
Responses weighted by each expert's confidence
Question B:
Loosening regulations on state aid will give a substantial advantage to the economies of EU members with stronger public finances.
Responses
Responses weighted by each expert's confidence
Question C:
Even if looser regulations on state aid are temporary, they risk permanent damage to the EU’s longstanding competition policy regime.
Responses
Responses weighted by each expert's confidence
Question A Participant Responses
| Participant | University | Vote | Confidence | Bio/Vote History |
|---|---|---|---|---|
 Franklin Allen |
Imperial College London | Bio/Vote History | ||
|
Difficult to say. One issue is where the money for the subsidies come from. ANother is where the resources come from.
|
||||
 Pol Antras |
Harvard | Bio/Vote History | ||
|
A non-coordinated policy might lead to inefficient tax competition and a "race-to-the-bottom" in tax rates.
|
||||
 Olivier Blanchard |
Peterson Institute | Bio/Vote History | ||
|
Good for Europe, but not necessarily good for the world
|
||||
 Nicholas Bloom |
Stanford | Bio/Vote History | ||
|
Government interference in industries has a long track record of failure. And even the "successes" are often failures due to he massive fiscal costs. Please don't push this - it's a horrible idea!
|
||||
 Richard William Blundell |
University College London | Did Not Answer | Bio/Vote History | |
|
|
||||
 Maristella Botticini |
Bocconi | Bio/Vote History | ||
|
|
||||
 Agnès Bénassy-Quéré |
Paris School of Economics | Bio/Vote History | ||
|
"Targeted" is a keyword here. All depends on the extent of fixed costs, uncertainty and the horizon of the investment. These interventions should be coordinated across governments in order to avoid a race for subsidies.
|
||||
 Elena Carletti |
Bocconi | Bio/Vote History | ||
|
|
||||
 Jean-Pierre Danthine |
Paris School of Economics | Bio/Vote History | ||
|
reluctantly. But if all major partners (China, US) play that game it would be naive not to keep an open mind!
|
||||
 Paul De Grauwe |
LSE | Bio/Vote History | ||
|
|
||||
 Jan Eeckhout |
UPF Barcelona | Bio/Vote History | ||
|
Distinguish between what is socially optimal and what is best response (it is a zero sum game, so if the whole world does it, then yes). Not socially optimal so we need international coordination to reduce state aid, except in some cases (infant industries, strategic importance)
|
||||
 Ernst Fehr |
Universität Zurich | Bio/Vote History | ||
|
|
||||
 Xavier Freixas |
Barcelona GSE | Did Not Answer | Bio/Vote History | |
|
|
||||
 Nicola Fuchs-Schündeln |
Goethe-Universität Frankfurt | Did Not Answer | Bio/Vote History | |
|
|
||||
 Jordi Galí |
Barcelona GSE | Bio/Vote History | ||
|
|
||||
 Yuriy Gorodnichenko |
Berkeley | Bio/Vote History | ||
|
|
||||
 Rachel Griffith |
University of Manchester | Bio/Vote History | ||
|
|
||||
 Veronica Guerrieri |
Chicago Booth | Did Not Answer | Bio/Vote History | |
|
|
||||
 Luigi Guiso |
Einaudi Institute for Economics and Finance | Bio/Vote History | ||
|
|
||||
 Sergei Guriev |
Sciences Po | Bio/Vote History | ||
|
|
||||
 Patrick Honohan |
Trinity College Dublin | Bio/Vote History | ||
|
Rent-seeking might be the dominant effect
|
||||
 Beata Javorcik |
University of Oxford | Bio/Vote History | ||
|
|
||||
 Jan Pieter Krahnen |
Goethe University Frankfurt | Bio/Vote History | ||
|
In contrast to the US, there are 27 EU countries starting to incentivize investment - a lot of it may be used to compete internally, thereby weakening or even nullifying the aggregate effect.
|
||||
 Botond Kőszegi |
Central European University | Bio/Vote History | ||
|
|
||||
 Eliana La Ferrara |
Harvard Kennedy | Did Not Answer | Bio/Vote History | |
|
|
||||
 Christian Leuz |
Chicago Booth | Bio/Vote History | ||
|
It will have this effect on the EU's relative attractiveness (and counter US incentives) but also lead to some zero sum competition within the EU. Similar to tax competition.
|
||||
 Thierry Mayer |
Sciences-Po | Bio/Vote History | ||
|
|
||||
 Costas Meghir |
Yale | Bio/Vote History | ||
|
|
||||
 Marco Pagano |
Università di Napoli Federico II | Bio/Vote History | ||
|
|
||||
 Lubos Pastor |
Chicago Booth | Bio/Vote History | ||
|
In the short run, yes. But in the long run, it will hurt the EU by undermining its single market.
|
||||
 Torsten Persson |
Stockholm University | Did Not Answer | Bio/Vote History | |
|
|
||||
 Christopher Pissarides |
London School of Economics and Political Science | Did Not Answer | Bio/Vote History | |
|
|
||||
 Richard Portes |
London Business School | Bio/Vote History | ||
|
|
||||
 Canice Prendergast |
Chicago Booth | Bio/Vote History | ||
|
|
||||
 Carol Propper |
Imperial College London | Did Not Answer | Bio/Vote History | |
|
|
||||
 Imran Rasul |
University College London | Did Not Answer | Bio/Vote History | |
|
|
||||
 Lucrezia Reichlin |
London Business School | Bio/Vote History | ||
|
|
||||
 Ricardo Reis |
London School of Economics | Bio/Vote History | ||
|
I worry that most of the effect will be diversion of investment across EU states, so the effects will be small for the EU on aggregate.
-see background information here |
||||
 Rafael Repullo |
CEMFI | Bio/Vote History | ||
|
|
||||
 Hélène Rey |
London Business School | Did Not Answer | Bio/Vote History | |
|
|
||||
 Antoinette Schoar |
MIT | Bio/Vote History | ||
|
|
||||
 Kjetil Storesletten |
University of Minnesota | Bio/Vote History | ||
|
|
||||
 Daniel Sturm |
London School of Economics | Bio/Vote History | ||
|
While local location decisions will be influenced by subsidies, it is hard to see how the Europe versus not Europe decision could depend substantially on subsidies for most firms.
|
||||
 John Van Reenen |
LSE | Bio/Vote History | ||
|
EU State Aid rules already have flexibility to allow for relaxation of rules for technology and reserach co-operation. Further weakening could reduce competitive forces
|
||||
 Rick Van der Ploeg |
Oxford | Bio/Vote History | ||
|
Loosening state aid regulations will curb competition and all the benefits in terms of price and innovation that brings. It might help to get some green companies of the ground, but it is better to persuade the US to stop doing this.
|
||||
 John Vickers |
Oxford | Bio/Vote History | ||
|
The regime already allows appropriate targeting. Loosening could well result in more losers than winners taking subsidy costs into account.
|
||||
 Hans-Joachim Voth |
University of Zurich | Bio/Vote History | ||
|
|
||||
 Karl Whelan |
University College Dublin | Bio/Vote History | ||
|
Ultimately tax incentives have to offset with higher taxes elsewhere. The benefits of this strategy depend on whether the government is good at picking winners when deciding on tax incentives. It is not clear European govenments are that good at it.
|
||||
 Charles Wyplosz |
The Graduate Institute Geneva | Bio/Vote History | ||
|
Capture and misguided bureaucratic/politicized likely to look large
|
||||
Question B Participant Responses
| Participant | University | Vote | Confidence | Bio/Vote History |
|---|---|---|---|---|
|
Franklin Allen |
Imperial College London | Bio/Vote History | ||
|
Again, it is not clear. There are many factors at play including resilience of firms, again where resources come from, and how this affects other industries.
|
||||
|
Pol Antras |
Harvard | Bio/Vote History | ||
|
Holding other things equal!
|
||||
|
Olivier Blanchard |
Peterson Institute | Bio/Vote History | ||
|
arithmetically so
|
||||
|
Nicholas Bloom |
Stanford | Bio/Vote History | ||
|
It will be a big disadvantage to them. They will waste government money of various pet-subsidy schemes of politicians, using up government funding. Countries with tight budgets will not have the money to waste.
|
||||
|
Richard William Blundell |
University College London | Did Not Answer | Bio/Vote History | |
|
|
||||
|
Maristella Botticini |
Bocconi | Bio/Vote History | ||
|
|
||||
|
Agnès Bénassy-Quéré |
Paris School of Economics | Bio/Vote History | ||
|
|
||||
|
Elena Carletti |
Bocconi | Bio/Vote History | ||
|
|
||||
|
Jean-Pierre Danthine |
Paris School of Economics | Bio/Vote History | ||
|
In principle yes unless aids are considered at the European level!
|
||||
|
Paul De Grauwe |
LSE | Bio/Vote History | ||
|
|
||||
|
Jan Eeckhout |
UPF Barcelona | Bio/Vote History | ||
|
State is not socially optimal
|
||||
|
Ernst Fehr |
Universität Zurich | Bio/Vote History | ||
|
|
||||
|
Xavier Freixas |
Barcelona GSE | Did Not Answer | Bio/Vote History | |
|
|
||||
|
Nicola Fuchs-Schündeln |
Goethe-Universität Frankfurt | Did Not Answer | Bio/Vote History | |
|
|
||||
|
Jordi Galí |
Barcelona GSE | Bio/Vote History | ||
|
|
||||
|
Yuriy Gorodnichenko |
Berkeley | Bio/Vote History | ||
|
|
||||
|
Rachel Griffith |
University of Manchester | Bio/Vote History | ||
|
|
||||
|
Veronica Guerrieri |
Chicago Booth | Did Not Answer | Bio/Vote History | |
|
|
||||
|
Luigi Guiso |
Einaudi Institute for Economics and Finance | Bio/Vote History | ||
|
|
||||
|
Sergei Guriev |
Sciences Po | Bio/Vote History | ||
|
|
||||
|
Patrick Honohan |
Trinity College Dublin | Bio/Vote History | ||
|
Or loosening these rules might simply enable governments with more headroom to adopt larger distorting policies that are more damaging...
|
||||
|
Beata Javorcik |
University of Oxford | Bio/Vote History | ||
|
|
||||
|
Jan Pieter Krahnen |
Goethe University Frankfurt | Bio/Vote History | ||
|
While strong public finances will allow a country to spend more, the EU procurement rules limit the possibility to target investment in a particular country - as large investment are subjected to a EU-wide call for tender.
|
||||
|
Botond Kőszegi |
Central European University | Bio/Vote History | ||
|
|
||||
|
Eliana La Ferrara |
Harvard Kennedy | Did Not Answer | Bio/Vote History | |
|
|
||||
|
Christian Leuz |
Chicago Booth | Bio/Vote History | ||
|
Not sure about "substantial" - depends on how the temporary loosening is implemented (e.g., how targeted, how long, any EU funds for poorer countries, etc.)
|
||||
|
Thierry Mayer |
Sciences-Po | Bio/Vote History | ||
|
|
||||
|
Costas Meghir |
Yale | Bio/Vote History | ||
|
|
||||
|
Marco Pagano |
Università di Napoli Federico II | Bio/Vote History | ||
|
|
||||
|
Lubos Pastor |
Chicago Booth | Bio/Vote History | ||
|
|
||||
|
Torsten Persson |
Stockholm University | Did Not Answer | Bio/Vote History | |
|
|
||||
|
Christopher Pissarides |
London School of Economics and Political Science | Did Not Answer | Bio/Vote History | |
|
|
||||
|
Richard Portes |
London Business School | Bio/Vote History | ||
|
|
||||
|
Canice Prendergast |
Chicago Booth | Bio/Vote History | ||
|
|
||||
|
Carol Propper |
Imperial College London | Did Not Answer | Bio/Vote History | |
|
|
||||
|
Imran Rasul |
University College London | Did Not Answer | Bio/Vote History | |
|
|
||||
|
Lucrezia Reichlin |
London Business School | Bio/Vote History | ||
|
|
||||
|
Ricardo Reis |
London School of Economics | Bio/Vote History | ||
|
|
||||
|
Rafael Repullo |
CEMFI | Bio/Vote History | ||
|
|
||||
|
Hélène Rey |
London Business School | Did Not Answer | Bio/Vote History | |
|
|
||||
|
Antoinette Schoar |
MIT | Bio/Vote History | ||
|
|
||||
|
Kjetil Storesletten |
University of Minnesota | Bio/Vote History | ||
|
|
||||
|
Daniel Sturm |
London School of Economics | Bio/Vote History | ||
|
Even if the advantage turned out to be quantitively small, it will create a lot of unnecessary bad feelings.
|
||||
|
John Van Reenen |
LSE | Bio/Vote History | ||
|
|
||||
|
Rick Van der Ploeg |
Oxford | Bio/Vote History | ||
|
If a country is going to it and it is economically worthwhile, then it should be possible to borrow for such state investments in private companies.
|
||||
|
John Vickers |
Oxford | Bio/Vote History | ||
|
Maybe to subsidy recipients in those economies but to the detriment of their taxpayers.
|
||||
|
Hans-Joachim Voth |
University of Zurich | Bio/Vote History | ||
|
|
||||
|
Karl Whelan |
University College Dublin | Bio/Vote History | ||
|
I'm not sure this is a good economic policy but if it does have benefits I doubt if they could be characterised as substantial.
|
||||
|
Charles Wyplosz |
The Graduate Institute Geneva | Bio/Vote History | ||
|
Some countries may get it right, others will get it wrong, so net advantage can turn into net loss, but countries with stronger public finances can better absorb losses
|
||||
Question C Participant Responses
| Participant | University | Vote | Confidence | Bio/Vote History |
|---|---|---|---|---|
|
Franklin Allen |
Imperial College London | Bio/Vote History | ||
|
State aid was allowed temporarily in some sectors during the financial crisis. This does not seem to have had a too long lasting effect on EU competition policy. But this time may be different since the circumstances are so different.
|
||||
|
Pol Antras |
Harvard | Bio/Vote History | ||
|
|
||||
|
Olivier Blanchard |
Peterson Institute | Bio/Vote History | ||
|
same issue: what are the new rules of the international trade game?
|
||||
|
Nicholas Bloom |
Stanford | Bio/Vote History | ||
|
|
||||
|
Richard William Blundell |
University College London | Did Not Answer | Bio/Vote History | |
|
|
||||
|
Maristella Botticini |
Bocconi | Bio/Vote History | ||
|
|
||||
|
Agnès Bénassy-Quéré |
Paris School of Economics | Bio/Vote History | ||
|
|
||||
|
Elena Carletti |
Bocconi | Bio/Vote History | ||
|
|
||||
|
Jean-Pierre Danthine |
Paris School of Economics | Bio/Vote History | ||
|
|
||||
|
Paul De Grauwe |
LSE | Bio/Vote History | ||
|
|
||||
|
Jan Eeckhout |
UPF Barcelona | Bio/Vote History | ||
|
|
||||
|
Ernst Fehr |
Universität Zurich | Bio/Vote History | ||
|
|
||||
|
Xavier Freixas |
Barcelona GSE | Did Not Answer | Bio/Vote History | |
|
|
||||
|
Nicola Fuchs-Schündeln |
Goethe-Universität Frankfurt | Did Not Answer | Bio/Vote History | |
|
|
||||
|
Jordi Galí |
Barcelona GSE | Bio/Vote History | ||
|
|
||||
|
Yuriy Gorodnichenko |
Berkeley | Bio/Vote History | ||
|
|
||||
|
Rachel Griffith |
University of Manchester | Bio/Vote History | ||
|
|
||||
|
Veronica Guerrieri |
Chicago Booth | Did Not Answer | Bio/Vote History | |
|
|
||||
|
Luigi Guiso |
Einaudi Institute for Economics and Finance | Bio/Vote History | ||
|
|
||||
|
Sergei Guriev |
Sciences Po | Bio/Vote History | ||
|
|
||||
|
Patrick Honohan |
Trinity College Dublin | Bio/Vote History | ||
|
|
||||
|
Beata Javorcik |
University of Oxford | Bio/Vote History | ||
|
|
||||
|
Jan Pieter Krahnen |
Goethe University Frankfurt | Bio/Vote History | ||
|
Yes, I fear so...
|
||||
|
Botond Kőszegi |
Central European University | Bio/Vote History | ||
|
|
||||
|
Eliana La Ferrara |
Harvard Kennedy | Did Not Answer | Bio/Vote History | |
|
|
||||
|
Christian Leuz |
Chicago Booth | Bio/Vote History | ||
|
Again, much depends on strict implementation (temporary, targeted, limited to those affected by US IRA, etc.). Poor implementation could have this effect but weakening EU competition regime would not be good. See links on earlier IGM polls on EU competition policy below.
-see background information here -see background information here |
||||
|
Thierry Mayer |
Sciences-Po | Bio/Vote History | ||
|
|
||||
|
Costas Meghir |
Yale | Bio/Vote History | ||
|
|
||||
|
Marco Pagano |
Università di Napoli Federico II | Bio/Vote History | ||
|
|
||||
|
Lubos Pastor |
Chicago Booth | Bio/Vote History | ||
|
|
||||
|
Torsten Persson |
Stockholm University | Did Not Answer | Bio/Vote History | |
|
|
||||
|
Christopher Pissarides |
London School of Economics and Political Science | Did Not Answer | Bio/Vote History | |
|
|
||||
|
Richard Portes |
London Business School | Bio/Vote History | ||
|
|
||||
|
Canice Prendergast |
Chicago Booth | Bio/Vote History | ||
|
|
||||
|
Carol Propper |
Imperial College London | Did Not Answer | Bio/Vote History | |
|
|
||||
|
Imran Rasul |
University College London | Did Not Answer | Bio/Vote History | |
|
|
||||
|
Lucrezia Reichlin |
London Business School | Bio/Vote History | ||
|
|
||||
|
Ricardo Reis |
London School of Economics | Bio/Vote History | ||
|
My impression is that the literature in the last two decades has found several examples of industrial policies working. Of course, sometimes is not working on average
-see background information here -see background information here -see background information here -see background information here |
||||
|
Rafael Repullo |
CEMFI | Bio/Vote History | ||
|
|
||||
|
Hélène Rey |
London Business School | Did Not Answer | Bio/Vote History | |
|
|
||||
|
Antoinette Schoar |
MIT | Bio/Vote History | ||
|
|
||||
|
Kjetil Storesletten |
University of Minnesota | Bio/Vote History | ||
|
|
||||
|
Daniel Sturm |
London School of Economics | Bio/Vote History | ||
|
There are good reasons to be flexible in a crisis, but such precedents may obviously be damaging in the long-run.
|
||||
|
John Van Reenen |
LSE | Bio/Vote History | ||
|
|
||||
|
Rick Van der Ploeg |
Oxford | Bio/Vote History | ||
|
It is less damaging if it is temporary, but the door has been opened and more damage may be done on future occasions.
|
||||
|
John Vickers |
Oxford | Bio/Vote History | ||
|
|
||||
|
Hans-Joachim Voth |
University of Zurich | Bio/Vote History | ||
|
|
||||
|
Karl Whelan |
University College Dublin | Bio/Vote History | ||
|
Yes. The competition regime is an important part of what makes the European single market work well and it is best to not undermine it. Once this precedent is set, all sorts of other anti-competitive state aids could be introduced.
|
||||
|
Charles Wyplosz |
The Graduate Institute Geneva | Bio/Vote History | ||
|
Temporary can turn into permanent and temporary misallocation of resources can have long-lasting effects.
|
||||
