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Mike Long
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Agent Based Modeling of Corporate Subsidies

FacultyThomas Hopkins

Mike Long

Agents on Computer Resource Landscape

Since October 2008, the federal government’s Troubled Asset Relief Program (TARP) has distributed to parts of the U.S. auto industry more than $80 billion of taxpayer funds – some $800 per American taxpaying family.  While roughly $30 billion had been repaid by mid-January 2011, the Congressional Oversight Panel [1], which monitors bailout programs, concluded on January 13, 2011 that full repayment is not likely ever to occur.  This is truly an expensive bailout or subsidy, but the U.S. economic structure is suffused with many such subsidies, both short-term and continuing.  For example, from $10 billion to $30 billion annually flows from the federal budget to farmers [2].  Many other subsidies are hidden: the price paid by US consumers for sugar is far higher than the world price because the government restricts sugar imports in order to assist domestic sugar producers; one result is that US candy manufacturers are internationally disadvantaged in competing with foreign-based manufacturers.

The merit of the US governments's corporate subsidies programs are contentious.  Our agent-based modeling approach to such policy show an intriguingly suggestive perspective on subsidy programs, calling into question both their efficiency and fairness.  Our hypothesis is that government subsidies affect and downgrade the entire economy, and companies that undergo bankruptcy have a higher probability of its recurrence.