Application of Agent-Based Modeling to the Cost of Corporate Subsidies
2012
The US government's auto industry bailout was just one of many costly programs that target subsidies to particular firms. The merit of such programs is contentious, and more fundamentally, so too is the choice of a basis for their assessment. This short paper applies an agent-based modeling approach to such policy assessment. The result is an intriguingly suggestive perspective on subsidy programs, calling into questions both their efficiency and fairness. Our hypothesis is that government subsidies affect and downgrade the entire economy, and subsidized companies that undergo bankruptcy have a higher probability of its recurrence than those that have not already gone bankrupt.
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