With increasing frequency, state governments offer incentive packages to keep companies from leaving. But these tax incentive packages can cost more than foregone revenues from the single threatening firm. Other firms are encouraged to demand similar tax breaks. The authors explicitly consider the role of these copy cats in determining a government's optimal response to firm relocation threats. The information may help governments distinguish for which cases offering incentives is a worthwhile investment.
This working paper was published as Wohlgemuth, Darin and Maureen Kilkenny, "Firm Relocation Costs and Copy Cat Costs," International Regional Science Review 21 (1998): 139–162, doi:10.1177/016001769802100203.
Wohlgemuth, Darin and Kilkenny, Maureen, "Firm Relocation Threats and Copy Cat Costs" (1995). CARD Working Papers. 197.