Economic Geography and the Fiscal Effects of Regional Integration
AbstractIn models of economic geography, plant-level scale economies and trade costs create incentives for spatial agglomeration of production into a manufacturing core and agricultural periphery, creating regional income differentials. We examine tax competition between national governments to influence the location of manufacturing activity. Labour is imperfectly mobile and governments impose redistributive taxes. Regional integration is modeled as either increased labour mobility or lower trade costs. We show that either type of integration may result in a decrease in the intensity of tax competition, and thus higher equilibrium taxes. Moreover, economic integration must increase taxes when the forces of agglomeration are the strongest.
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Bibliographic InfoPaper provided by EconWPA in its series International Trade with number 9801001.
Length: 38 pages
Date of creation: 20 Jan 1998
Date of revision:
Note: Type of Document - MS Word; prepared on IBM PC ; to print on HP; pages: 38 ; figures: included. * Drafts of this paper have been presented at the European Science Foundation conference on Migration and Development, Mont Ste-Odile, May 1996; a Workshop on International Trade and Factor Movements between Distorted Economies held by the University of Konstanz, July 1996; the annual meeting of the American Economic Association, New Orleans, January 1997; the Midwest International Economics conference, May 1997; and workshops at EPRU, Copenhagen in July 1997 and the Tinbergen Institute, Rotterdam in November 1997. We are grateful to participants for their comments and suggestions.
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economic integration; economic geography; factor mobility; international trade; tax competition;
Other versions of this item:
- Ludema, Rodney D. & Wooton, Ian, 2000. "Economic geography and the fiscal effects of regional integration," Journal of International Economics, Elsevier, vol. 52(2), pages 331-357, December.
- Ludema, Rodney D & Wooton, Ian, 1998. "Economic Geography and the Fiscal Effects of Regional Integration," CEPR Discussion Papers 1822, C.E.P.R. Discussion Papers.
- Rodney D. Ludema & Ian Wooton, 1998. "Economic Geography and the Fiscal Effects of Regional Integration," Working Papers 9809, Business School - Economics, University of Glasgow.
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
- F15 - International Economics - - Trade - - - Economic Integration
- F22 - International Economics - - International Factor Movements and International Business - - - International Migration
- H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
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