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Fiscal competition and regional differentiation

  • THISSE, J.-F.
  • van YPERSELE, T.

Regions can benefit by offering infrastructure services that are differentiated. Competition between regions over potential investors is then less direct, allowing them to realize greater benefits from external investors. The two polar cases of full and incomplete information about investors' needs are studied. In both cases, there is regional differentiation. However, fiscal competition is efficient in the former case but not in the latter. Finally, it is shown that free entry in the location market calls for some regulation because of the excessive number of competing regions that would prevail in equilibrium.

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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2001024.

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Date of creation: 00 May 2001
Date of revision:
Handle: RePEc:cor:louvco:2001024
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  1. Wilson, John Douglas, 1999. "Theories of Tax Competition," National Tax Journal, National Tax Association, vol. 52(n. 2), pages 269-304, June.
  2. JUSTMAN, Moshe & THISSE, Jacques-François & VAN YPERSELE, Tanguy, . "Taking the bite out of fiscal competition," CORE Discussion Papers RP 1598, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. Wildasin, D.E., 1987. "Nash equilibria in models of fiscal competition," CORE Discussion Papers 1987020, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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  8. Martin, Philippe, 1998. "Public Policies, Regional Inequalities and Growth," CEPR Discussion Papers 1841, C.E.P.R. Discussion Papers.
  9. Anderson, S. & Neven, D.J., 1986. "Market efficiency with combinable products," CORE Discussion Papers 1986045, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  10. 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.
  11. Alberto Alesina & Enrico Spolaore, 1997. "On the Number and Size of Nations," The Quarterly Journal of Economics, Oxford University Press, vol. 112(4), pages 1027-1056.
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  14. Taylor, Leon, 1992. "Infrastructural competition among jurisdictions," Journal of Public Economics, Elsevier, vol. 49(2), pages 241-259, November.
  15. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416.
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