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How to make the metropolitan area work ? Neither big government, nor laissez-faire

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  • Carl Gaigné

    (INRA, UMR1302, 4 Allée Bobierre, F-35000 Rennes, France)

  • Stéphane Riou

    (Université de Lyon, Lyon, F-69007, France ; CNRS, GATE Lyon St Etienne,Université Jean Monnet, Saint-Etienne, F-42000, France)

  • Jacques-François Thisse

    (CORE, Université catholique de Louvain (Belgium), Higher School of Economics (Russia) and CEPR)

Abstract

We study how political boundaries and fiscal competition interact with the labor and land markets to determine the economic structure and performance of metropolitan areas. Contrary to general belief, institutional fragmentation need not be welfare-decreasing, and commuting from the suburbs to the central city is not wasteful. Thus, the institutional and economic limits of the central city are not the same. With tax competition, the central business district is too small. The dispersion of jobs is increased when suburbanite workers are allowed to consume the public services supplied by the central city. This indicates the need for some metropolitan governance.

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Bibliographic Info

Paper provided by Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure in its series Working Papers with number 1318.

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Date of creation: 2013
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Handle: RePEc:gat:wpaper:1318

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Keywords: metropolitan area; fiscal competition; local labor markets; suburbanization; administrative boundary; economic boundary;

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