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

Listed author(s):
  • Carl Gaigné

    ()

    (SMART - Structures et Marché Agricoles, Ressources et Territoires - INRA - Institut National de la Recherche Agronomique - AGROCAMPUS OUEST, CREATE, Centre de Recherche de l'Environnement, de l'Agroalimentaire, des Transports et de l'Énergie - Université Laval)

  • Stéphane Riou

    (Université de Rouen, UMR 5824, GATE (Groupe d'Analayse et de Théorie Economique) - CNRS - Centre National de la Recherche Scientifique)

  • Jacques-François Thisse

    (Université Catholique de Louvain, HSE - State University - Higher School of Economics, Centre for Economic Policy Research)

We study how administrative boundaries and tax competition among asymmetric jurisdictions interact with the labor and land markets to determine the economic structure and performance of metropolitan areas. Contrary to general belief, cross-border commuting need not be welfare-decreasing in the presence of agglomeration economies that vary with the distribution of firms within the metropolitan area. Tax competition implies that the central business district is too small and prevents public policy enhancing global productivity to deliver their full impact. Although our results support the idea of decentralizing the provision of local public services by independent jurisdictions, they highlight the need of coordinating tax policies and the importance of the jurisdiction sizes within metropolitan areas.

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Paper provided by HAL in its series Post-Print with number hal-01512068.

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Date of creation: 2016
Publication status: Published in Journal of Public Economics, Elsevier, 2016, 134, pp.100-113. <10.1016/j.jpubeco.2015.12.002>
Handle: RePEc:hal:journl:hal-01512068
DOI: 10.1016/j.jpubeco.2015.12.002
Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-01512068
Contact details of provider: Web page: https://hal.archives-ouvertes.fr/

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