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Agglomeration Effects and the Competition for Firms

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  • Robin Boadway

    ()

  • Katherine Cuff

    ()

  • Nicolas Marceau

    ()

Abstract

A two-region economy consists of a given but different number of immobile workers in each region, and a given number of mobile firms. Firms create jobs where they locate, but there is frictional unemployment. Two sorts of agglomeration effects arise: those from economies of scale in matching, and those from production economies external to the firm. Regions may either be part of a unitary state in which case all regional policies are decided by the central government, or they may be part of a federal state in which case some policies are determined by the regional governments. We characterize the resource allocations in both a unitary and a federal state, and identify the set of instruments that are required to replicate the social optimum in each state.

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Bibliographic Info

Article provided by Springer in its journal International Tax and Public Finance.

Volume (Year): 11 (2004)
Issue (Month): 5 (09)
Pages: 623-645

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Handle: RePEc:kap:itaxpf:v:11:y:2004:i:5:p:623-645

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Web page: http://www.springerlink.com/link.asp?id=102915

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  1. Rodney D. Ludema & Ian Wooton, 1998. "Economic Geography and the Fiscal Effects of Regional Integration," Working Papers 9809, Business School - Economics, University of Glasgow.
  2. Wilson, John Douglas, 1991. "Tax competition with interregional differences in factor endowments," Regional Science and Urban Economics, Elsevier, vol. 21(3), pages 423-451, November.
  3. Kind, Hans Jarle & Schjelderup, Guttorm & Ulltveit-Moe, Karen-Helene, 1999. "Competing for Capital in a 'Lumpy' World," CEPR Discussion Papers 2188, C.E.P.R. Discussion Papers.
  4. Bucovetsky, S., 1991. "Asymmetric tax competition," Journal of Urban Economics, Elsevier, vol. 30(2), pages 167-181, September.
  5. P. Diamond, 1980. "Aggregate Demand Management in Search Equilibrium," Working papers 268, Massachusetts Institute of Technology (MIT), Department of Economics.
  6. Haufler, Andreas & Wooton, Ian, 1999. "Country size and tax competition for foreign direct investment," Munich Reprints in Economics 20408, University of Munich, Department of Economics.
  7. Boadway, Robin & Cuff, Katherine & Marceau, Nicolas, 2003. "Redistribution and employment policies with endogenous unemployment," Journal of Public Economics, Elsevier, vol. 87(11), pages 2407-2430, October.
  8. Robin Boadway & Katherine Cuff & Nicolas Marceau, 2002. "Inter-Jurisdictional Competition for Firms," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(3), pages 761-782, August.
  9. Johnson, G.E. & Layard, P.R.G., 1987. "The natural rate of unemployment: Explanation and policy," Handbook of Labor Economics, in: O. Ashenfelter & R. Layard (ed.), Handbook of Labor Economics, edition 1, volume 2, chapter 16, pages 921-999 Elsevier.
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