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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. Hanson, Gordon H., 2001. "U.S.-Mexico Integration and Regional Economies: Evidence from Border-City Pairs," Journal of Urban Economics, Elsevier, vol. 50(2), pages 259-287, September.
  2. Nielsen, Søren Bo, 1998. "A simple model of commodity taxation and cross-border shopping," Working Papers 13-1998, Copenhagen Business School, Department of Economics.
  3. Haufler,Andreas, 2008. "Taxation in a Global Economy," Cambridge Books, Cambridge University Press, number 9780521047593, November.
  4. Vander Lucas, 2002. "Cross-border shopping in a federal economy," Economics Bulletin, AccessEcon, vol. 28(12), pages A0.
  5. Hoxby, Caroline & Baqir, Reza & Alesina, Alberto, 2004. "Political Jurisdictions in Heterogeneous Communities," Scholarly Articles 4552532, Harvard University Department of Economics.
  6. 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, vol. 4(1), pages 136-63, January.
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  8. 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.
  9. Kessler, Anke S. & Lulfesmann, Christoph, 2005. "Tiebout and redistribution in a model of residential and political choice," Journal of Public Economics, Elsevier, vol. 89(2-3), pages 501-528, February.
  10. Hanson, Gordon H., 1996. "Economic integration, intraindustry trade, and frontier regions," European Economic Review, Elsevier, vol. 40(3-5), pages 941-949, April.
  11. Westhoff, Frank, 1979. "Policy inferences from community choice models: A caution," Journal of Urban Economics, Elsevier, vol. 6(4), pages 535-549, October.
  12. Mansoorian, Arman & Myers, Gordon M., 1993. "Attachment to home and efficient purchases of population in a fiscal externality economy," Journal of Public Economics, Elsevier, vol. 52(1), pages 117-132, August.
  13. 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, vol. 23(5), pages 585-610, November.
  14. Dennis Epple & Thomas Romer & Holger Sieg, 2001. "Interjurisdictional Sorting and Majority Rule: An Empirical Analysis," Econometrica, Econometric Society, vol. 69(6), pages 1437-1465, November.
  15. Bela Balassa, 1964. "The Purchasing-Power Parity Doctrine: A Reappraisal," Journal of Political Economy, University of Chicago Press, vol. 72, pages 584.
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Cited by:
  1. Kristof Dascher & Alexander Haupt, 2008. "The Political Economy of Regional Integration Projects at Borders where Rich and Poor Meet: The Role of Cross-Border Shopping and Community Sorting," CESifo Working Paper Series 2280, CESifo Group Munich.
  2. Kristof Dascher, 2011. "Beggar Thy Neighbour?," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 12(2), pages 132-150, 05.
  3. 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.
  4. Sklias, Pantelis & Tsampra, Maria, 2012. "Towards an analytical framework of regional integration in Western Balkans," MPRA Paper 36504, University Library of Munich, Germany.
  5. 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.

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