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

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  • Gaigné, Carl
  • Riou, Stéphane
  • Thisse, Jacques-François

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 do not coincide at the social optimum. Under tax competition, the central business district is too small. The dispersion of jobs is increased when suburbanite workers consume the public services supplied by the central city. This indicates the need for some metropolitan governance.

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  • Gaigné, Carl & Riou, Stéphane & Thisse, Jacques-François, 2013. "How to make the metropolitan area work? Neither big government, nor laissez-faire," CEPR Discussion Papers 9499, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:9499
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    Cited by:

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    2. Fitjar, Rune Dahl, 2019. "2019/01 Merging city and suburban governments: A public choice perspective on the Norwegian local government reform," UiS Working Papers in Economics and Finance 2019/1, University of Stavanger.
    3. Gaigné, Carl & Riou, Stéphane & Thisse, Jacques-François, 2016. "How to make the metropolitan area work? Neither big government, nor laissez-faire," Journal of Public Economics, Elsevier, vol. 134(C), pages 100-113.
    4. Brülhart, Marius & Bucovetsky, Sam & Schmidheiny, Kurt, 2015. "Taxes in Cities," Handbook of Regional and Urban Economics, in: Gilles Duranton & J. V. Henderson & William C. Strange (ed.), Handbook of Regional and Urban Economics, edition 1, volume 5, chapter 0, pages 1123-1196, Elsevier.
    5. Yu, Huayi & Hou, Yujuan, 2021. "A tale of two districts: The impact of district consolidation on property values in Shanghai," Regional Science and Urban Economics, Elsevier, vol. 87(C).
    6. Wei Tang & Geoffrey J.D. Hewings, 2017. "Do city–county mergers in China promote local economic development?," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 25(3), pages 439-469, July.
    7. Kauffmann, Albrecht, 2015. "Wie lässt sich die Bevölkerungsentwicklung von Städten korrekt ermitteln? Eine Methode zur Bereinigung amtlicher Daten um die Effekte von Gebietsänderungen am Beispiel von Ostdeutschland," IWH Online 5/2015, Halle Institute for Economic Research (IWH).
    8. Romain Gaté, 2019. "Efficiency of road pricing schemes with endogenous workplace locations in a polycentric city," Working Papers halshs-02335766, HAL.
    9. ARTIGE, Lionel & CAVENAILE, Laurent & PESTIEAU, Pierre, 2014. "The macroeconomics of PAYG pension schemes in an aging society," LIDAM Discussion Papers CORE 2014033, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    10. Yuriy V. Pavlov, 2022. "Systematisation of factors behind the agglomeration effect," Journal of New Economy, Ural State University of Economics, vol. 22(4), pages 116-138, January.

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    More about this item

    Keywords

    administrative boundary; economic boundary; fiscal competition; local labor markets; metropolitan area; suburbanization;
    All these keywords.

    JEL classification:

    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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