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Fiscal competition and regional differentiation

  • JUSTMAN, M.
  • 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
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Handle: RePEc:cor:louvco:2001024
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  6. 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.
  7. Taylor, Leon, 1992. "Infrastructural competition among jurisdictions," Journal of Public Economics, Elsevier, vol. 49(2), pages 241-259, November.
  8. Justman, Moshe & Thisse, Jacques-Francois & van Ypersele, Tanguy, 2002. "Taking the bite out of fiscal competition," Journal of Urban Economics, Elsevier, vol. 52(2), pages 294-315, September.
  9. 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).
  10. Dennis Epple & Holger Sieg, 1999. "Estimating Equilibrium Models of Local Jurisdictions," Journal of Political Economy, University of Chicago Press, vol. 107(4), pages 645-681, August.
  11. Wilson, John Douglas, 1999. "Theories of Tax Competition," National Tax Journal, National Tax Association, vol. 52(n. 2), pages 269-304, June.
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