Any integrating or already integrated market that encompasses several jurisdictions or states is usually confronted in one way or another by the problem of state aids or subsidies, which are handed out by governments or governmental agencies to businesses that settle or have already settled in their jurisdiction. Economic theory posits that such measures distort the markets for investment and employment because they influence the decision making of enterprises, luring them into allocating resources according to political rather than economic, market-driven reasons (Färber 1989; Zippel 1993). Other strands of economic theory, however, disagree with this assessment of the impact of political interference on market forces. Whereas Keynesian demand-side approaches favor such interventions in order to correct for market failures, as well as smooth out and stabilize the steady growth of the economy (Hall 1989; Ikenberry 1993; Franz 1992), neoclassic supply-side economics considers such financial support to be part of the problem. Significant financial support requires big government, high taxes and equally high budget deficits. These usually lead to higher inflation and unnecessarily high interest rates, which – taken together with the high taxes – reduce investment in the real economy and, hence, lead to unemployment (Siebert 1990, 1995, 2000).

As far as empirically oriented economic literature goes, it is difficult to settle this debate once and for all because the decision of an enterprise about where to locate its investment seems to be based on a very complex set of reasons, including market access, transaction costs (infrastructure, suppliers), taxes, labor costs, and the amount of state aid available (Liemt 1992; Heise et al. 1998).