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The Political Economy of Regional Integration Projects at Borders where Rich and Poor Meet: The Role of Cross-Border Shopping and Community Sorting

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  • Kristof Dascher
  • Alexander Haupt

Abstract

At borders where rich and poor countries meet, services prices differ hugely. In principle, price differentials could be exploited to mutual benefit, offering improved job opportunities to the poor as well as better shopping opportunities to the rich. However, cross-border shopping is often limited by the substantial transaction costs of crossing the border. Moreover, local governments frequently fail to cut these transaction costs even where they have the opportunity to do so. In this paper, we show (i) why a majority of the local electorate often backs this outcome, (ii) how intra-country mobility affects local policy, and (iii) how (inter-) national regulations shape local decisions.

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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2280.

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Date of creation: 2008
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Handle: RePEc:ces:ceswps:_2280

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Keywords: cross-border shopping; community sorting; regional integration; voting; federalism;

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References

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  1. Vander Lucas, 2002. "Cross-border shopping in a federal economy," Economics Bulletin, AccessEcon, vol. 28(12), pages A0.
  2. Mansoorian, Arman & Myers, Gordon M., 1993. "Attachment to home and efficient purchases of population in a fiscal externality economy," Journal of Public Economics, Elsevier, Elsevier, vol. 52(1), pages 117-132, August.
  3. Haufler,Andreas, 2008. "Taxation in a Global Economy," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521047593.
  4. Kessler, Anke S. & Lulfesmann, Christoph, 2005. "Tiebout and redistribution in a model of residential and political choice," Journal of Public Economics, Elsevier, Elsevier, vol. 89(2-3), pages 501-528, February.
  5. Nielsen, Soren Bo, 2002. "Cross-border shopping from small to large countries," Economics Letters, Elsevier, Elsevier, vol. 77(3), pages 309-313, November.
  6. Epple, Dennis & Filimon, Radu & Romer, Thomas, 1984. "Equilibrium among local jurisdictions: toward an integrated treatment of voting and residential choice," Journal of Public Economics, Elsevier, Elsevier, vol. 24(3), pages 281-308, August.
  7. Bela Balassa, 1964. "The Purchasing-Power Parity Doctrine: A Reappraisal," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 72, pages 584.
  8. Kanbur, Ravi & Keen, Michael, 1993. "Jeux Sans Frontieres: Tax Competition and Tax Coordination When Countries Differ in Size," American Economic Review, American Economic Association, American Economic Association, vol. 83(4), pages 877-92, September.
  9. Dascher, Kristof & Haupt, Alexander, 2011. "The political economy of regional integration projects at borders where poor and rich meet: The role of cross-border shopping and community sorting," Journal of Urban Economics, Elsevier, vol. 69(1), pages 148-164, January.
  10. Søren Bo Nielsen, . "A Simple Model of Commodity Taxation and Cross-Border Shopping," EPRU Working Paper Series, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics 98-18, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
  11. Paul R. Bergin & Robert C. Feenstra & Gordon H. Hanson, 2009. "Offshoring and Volatility: Evidence from Mexico's Maquiladora Industry," American Economic Review, American Economic Association, American Economic Association, vol. 99(4), pages 1664-71, September.
  12. Gordon H. Hanson, 1996. "U.S.-Mexico Integration and Regional Economies: Evidence from Border- City Pairs," NBER Working Papers 5425, National Bureau of Economic Research, Inc.
  13. Hoxby, Caroline & Baqir, Reza & Alesina, Alberto, 2004. "Political Jurisdictions in Heterogeneous Communities," Scholarly Articles 4552532, Harvard University Department of Economics.
  14. Stephen Calabrese & Dennis Epple & Thomas Romer & Holger Sieg, 2005. "Local Public Good Provision: Voting, Peer Effects, and Mobility," NBER Working Papers 11720, National Bureau of Economic Research, Inc.
  15. Dennis Epple & Thomas Romer & Holger Sieg, 2001. "Interjurisdictional Sorting and Majority Rule: An Empirical Analysis," Econometrica, Econometric Society, Econometric Society, vol. 69(6), pages 1437-1465, November.
  16. Hanson, Gordon H., 1996. "Economic integration, intraindustry trade, and frontier regions," European Economic Review, Elsevier, Elsevier, vol. 40(3-5), pages 941-949, April.
  17. repec:hrv:faseco:4553034 is not listed on IDEAS
  18. Edward P. Lazear & Ulrike Malmendier & Roberto A. Weber, 2012. "Sorting in Experiments with Application to Social Preferences," American Economic Journal: Applied Economics, American Economic Association, American Economic Association, vol. 4(1), pages 136-63, January.
  19. Westhoff, Frank, 1979. "Policy inferences from community choice models: A caution," Journal of Urban Economics, Elsevier, vol. 6(4), pages 535-549, October.
  20. Epple, Dennis & Filimon, Radu & Romer, Thomas, 1993. "Existence of voting and housing equilibrium in a system of communities with property taxes," Regional Science and Urban Economics, Elsevier, Elsevier, vol. 23(5), pages 585-610, November.
  21. Nico A. Hansen & Anke S. Kessler, 2001. "The Political Geography of Tax H(e)avens and Tax Hells," American Economic Review, American Economic Association, American Economic Association, vol. 91(4), pages 1103-1115, September.
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Citations

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Cited by:
  1. Sklias, Pantelis & Tsampra, Maria, 2012. "Towards an analytical framework of regional integration in Western Balkans," MPRA Paper 36504, University Library of Munich, Germany.
  2. Fullerton, Thomas M., Jr. & Walke, Adam G., 2012. "Border zone mass transit demand in Brownsville and Laredo," MPRA Paper 42990, University Library of Munich, Germany.
  3. Dascher, Kristof & Haupt, Alexander, 2011. "The political economy of regional integration projects at borders where poor and rich meet: The role of cross-border shopping and community sorting," Journal of Urban Economics, Elsevier, vol. 69(1), pages 148-164, January.
  4. Braid, Ralph M., 2013. "State and local tax competition in a spatial model with sales taxes and residential property taxes," Journal of Urban Economics, Elsevier, vol. 75(C), pages 57-67.
  5. Kristof Dascher, 2011. "Beggar Thy Neighbour?," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, Verein für Socialpolitik, vol. 12(2), pages 132-150, 05.

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