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

  • Carl Gaigné

    (INRA Rennes - INRA Rennes - Institut national de la recherche agronomique (INRA))

  • Stéphane Riou

    ()

    (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université Jean Monnet - Saint-Etienne - PRES Université de Lyon - CNRS - Centre National de la Recherche Scientifique)

  • Jacques-François Thisse

    (CORE - Center of Operation Research and Econometrics [Louvain] - UCL - Université Catholique de Louvain, CREA - Center for Research in Economic Analysis - Uni.lu - Université du Luxembourg, CEPR - Center for Economic Policy Research - CEPR)

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 are not the same. With tax competition, the central business district is too small. The dispersion of jobs is increased when suburbanite workers are allowed to consume the public services supplied by the central city. This indicates the need for some metropolitan governance.

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Date of creation: 22 Apr 2013
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Handle: RePEc:hal:wpaper:halshs-00816405
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