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Taking the Bite Out of Fiscal Competition

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  • Justman, Moshe
  • Thisse, Jacques-François
  • van Ypersele, Tanguy

Abstract

Regions can benefit by offering infrastructure services that are differentiated by quality, thus segmenting the market for industrial location. Regions that compete on infrastructure quality have an incentive to increase the degree of differentiation between them. This places an upper bound on the number of regions successfully able to participate in the location market, and limits the dissipation of regional surplus through Tiebout competition. It indicates a process of fiscal agglomeration, through which regional concentrations arise, which does not depend on the circular causation underlying much of the recent literature on economic geography.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3109.

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Date of creation: Dec 2001
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Handle: RePEc:cpr:ceprdp:3109

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Related research

Keywords: fiscal competition; regional development; technological infrastructure; vertical differentiation;

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References

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  1. Black, Dan A & Hoyt, William H, 1989. "Bidding for Firms," American Economic Review, American Economic Association, vol. 79(5), pages 1249-56, December.
  2. Jan K. Brueckner, 1999. "Welfare Reform and the Race to the Bottom: Theory and Evidence," Southern Economic Journal, Southern Economic Association, vol. 66(2), pages 505-525, January.
  3. JUSTMAN, M. & THISSE, J.-F. & van YPERSELE, T., 2001. "Fiscal competition and regional differentiation," CORE Discussion Papers, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) 2001024, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  4. Moshe Justman & Jacques-Francois Thisse, 2000. "Local Public Funding of Higher Education When Skilled Labor is Imperfectly Mobile," International Tax and Public Finance, Springer, Springer, vol. 7(3), pages 247-258, May.
  5. Fujita, M. & Thisse, J.-F., . "Economics of agglomeration," CORE Discussion Papers RP -1250, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  6. JUSTMAN, Moshe & THISSE, Jacques-Francois, 1997. "Local public funding of higher education when skilled labor is mobile," CORE Discussion Papers, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) 1997024, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  7. Martin, Philippe, 1998. "Public Policies, Regional Inequalities and Growth," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1841, C.E.P.R. Discussion Papers.
  8. WILDASIN, David, . "Nash equilibria in models of fiscal competition," CORE Discussion Papers RP -804, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  9. Justman, Moshe & Teubal, Morris, 1995. "Technological infrastructure policy (TIP): Creating capabilities and building markets," Research Policy, Elsevier, vol. 24(2), pages 259-281, March.
  10. Ian King & R. Preston McAfee & Linda Welling, 1993. "Industrial Blackmail: Dynamic Tax Competition and Public Investment," Canadian Journal of Economics, Canadian Economics Association, vol. 26(3), pages 590-608, August.
  11. Taylor, Leon, 1992. "Infrastructural competition among jurisdictions," Journal of Public Economics, Elsevier, vol. 49(2), pages 241-259, November.
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