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Provision of Public Services and Industrial Location


  • Luis Lanaspa
  • Fernando Pueyo
  • Fernando Sanz


The literature that studies the effects that the government activity produces in the location decisions of the economic agents is relatively limited. In this work we introduce the public sector in Krugman's core-periphery model in order to contribute to solve this deficiency. The government provides public services, financed with different taxes. The main results are two. First, the public services are an element that attracts activity, while the taxes act in contrary sense. Consequently, the net effect is indeterminate and depends fundamentally on the subjective valuation that the individuals give to the provision of public services. Secondly, the introduction of new parameters in the model, those corresponding to the public sector, alters the influence on the equilibrium of those already existent. In particular, the effects of the transport cost on the concentration-dispersion results are not monotonous, now depend on the transport cost magnitude.

Suggested Citation

  • Luis Lanaspa & Fernando Pueyo & Fernando Sanz, "undated". "Provision of Public Services and Industrial Location," Working Papers 2000-26, FEDEA.
  • Handle: RePEc:fda:fdaddt:2000-26

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    References listed on IDEAS

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    6. Cooley, Thomas F. & Greenwood, Jeremy & Yorukoglu, Mehmet, 1997. "The replacement problem," Journal of Monetary Economics, Elsevier, vol. 40(3), pages 457-499, December.
    7. Ricardo J. Caballero & Adam B. Jaffe, 1993. "How High are the Giants' Shoulders: An Empirical Assessment of Knowledge Spillovers and Creative Destruction in a Model of Economic Growth," NBER Chapters,in: NBER Macroeconomics Annual 1993, Volume 8, pages 15-86 National Bureau of Economic Research, Inc.
    8. Hercowitz, Zvi, 1998. "The 'embodiment' controversy: A review essay," Journal of Monetary Economics, Elsevier, vol. 41(1), pages 217-224, February.
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    10. Ricardo J. Caballero & Eduardo M. R. A. Engel & John C. Haltiwanger, 1995. "Plant-Level Adjustment and Aggregate Investment Dynamics," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(2), pages 1-54.
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    Cited by:

    1. Luis Lanaspa & Fernando Pueyo & Fernando Sanz, 2008. "Foreign direct investment, industrial location and capital taxation," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 42(2), pages 413-423, June.

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