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Local Public Investment and Competition for a Firm

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  • Bruno Jullien

    (GREQAM-IDEI)

  • Frederic Rychen

    (GREQAM-IDEP)

  • Antoine Soubeyran

    (GREQAM)

Abstract

Most of the work in the field of competition between jurisdictions for the attraction of a large plant focuses on financial offers, bids or tax holidays. In this paper we add to the competition game an initial stage in which jurisdictions can invest in an infrastructure capital to enhance their attractiveness and modify the outcome of the competition stage. We characterize the Nash equilibrium of this game. In an example we show how the parameters of the model change the outcome of the game. In particular, the size of a jurisdiction is a powerful attraction force for the firm but it can be bypassed by a well specialized infrastructure capital, even if the competing jurisdiction is big.

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Bibliographic Info

Paper provided by Econometric Society in its series Econometric Society World Congress 2000 Contributed Papers with number 1400.

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Date of creation: 01 Aug 2000
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Handle: RePEc:ecm:wc2000:1400

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  1. 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.
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  3. Nadiri, M Ishaq & Mamuneas, Theofanis P, 1994. "The Effects of Public Infrastructure and R&D Capital on the Cost Structure and Performance of U.S. Manufacturing Industries," The Review of Economics and Statistics, MIT Press, vol. 76(1), pages 22-37, February.
  4. Chris Doyle & Sweder Wijnbergen, 1994. "Taxation of foreign multinationals: A sequential bargaining approach to tax holidays," International Tax and Public Finance, Springer, vol. 1(3), pages 211-225, October.
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  7. Alicia H. Munnell, 1991. "Is there a shortfall in public capital investment? An overview," New England Economic Review, Federal Reserve Bank of Boston, issue May, pages 23-35.
  8. King, Ian & Welling, Linda & Preston McAfee, R., 1992. "Investment decisions under first and second price auctions," Economics Letters, Elsevier, vol. 39(3), pages 289-293, July.
  9. Boadway, Robin W, 1973. "Similarities and Differences between Public Goods and Public Factors," Public Finance = Finances publiques, , vol. 28(3-4), pages 245-58.
  10. Evans, Paul & Karras, Georgios, 1994. "Are Government Activities Productive? Evidence from a Panel of U.S. States," The Review of Economics and Statistics, MIT Press, vol. 76(1), pages 1-11, February.
  11. Bond, Eric W & Samuelson, Larry, 1986. "Tax Holidays as Signals," American Economic Review, American Economic Association, vol. 76(4), pages 820-26, September.
  12. Henderson, J V, 1974. "A Note on the Economics of Public Intermediate Inputs," Economica, London School of Economics and Political Science, vol. 41(163), pages 322-27, August.
  13. Shah, Anwar, 1992. "Dynamics of Public Infrastructure, Industrial Productivity and Profitability," The Review of Economics and Statistics, MIT Press, vol. 74(1), pages 28-36, February.
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  16. Berndt, Ernst R & Hansson, Bengt, 1992. " Measuring the Contribution of Public Infrastructure Capital in Sweden," Scandinavian Journal of Economics, Wiley Blackwell, vol. 94(0), pages S151-68, Supplemen.
  17. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416.
  18. Seitz, Helmut, 1994. "Public capital and the demand for private inputs," Journal of Public Economics, Elsevier, vol. 54(2), pages 287-307, June.
  19. Lynde, Catherine & Richmond, J, 1993. "Public Capital and Long-Run Costs in U.K. Manufacturing," Economic Journal, Royal Economic Society, vol. 103(419), pages 880-93, July.
  20. King, Ian & Welling, Linda, 1992. "Commitment, Efficiency and Footloose Firms," Economica, London School of Economics and Political Science, vol. 59(233), pages 63-73, February.
  21. Sandmo, Agnar, 1972. "Optimality rules for the provision of collective factors of production," Journal of Public Economics, Elsevier, vol. 1(1), pages 149-157, April.
  22. McMillan, John, 1979. "A Note on the Economics of Public Intermediate Goods," Public Finance = Finances publiques, , vol. 34(2), pages 293-99.
  23. Douglas Holtz-Eakin & Mary E. Lovely, 1995. "Scale Economies, Returns to Variety, and the Productivity of Public Infrastructure," NBER Working Papers 5295, National Bureau of Economic Research, Inc.
  24. John A. Tatom, 1991. "Public capital and private sector performance," Review, Federal Reserve Bank of St. Louis, issue May, pages 3-15.
  25. Garcia-Mila, Teresa & McGuire, Therese J., 1992. "The contribution of publicly provided inputs to states' economies," Regional Science and Urban Economics, Elsevier, vol. 22(2), pages 229-241, June.
  26. Feehan, James P, 1989. "Pareto-Efficiency with Three Varieties of Public Input," Public Finance = Finances publiques, , vol. 44(2), pages 237-48.
  27. Taylor, Leon, 1992. "Infrastructural competition among jurisdictions," Journal of Public Economics, Elsevier, vol. 49(2), pages 241-259, November.
  28. Berndt, Ernst & Hansson, Bengt, 1992. "Measuring the Contribution of Capital in Sweden," Working Paper Series 365, Research Institute of Industrial Economics.
  29. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
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