IDEAS home Printed from https://ideas.repec.org/p/wiw/wiwrsa/ersa03p102.html

The Impact of Optimal Tariffs and Taxes on Agglomeration

Author

Listed:
  • Matthias Ross

Abstract

This paper extends an economic geography model by tariffs to analyze their impact on welfare and sustainability of agglomerations. Policies with and without cooperation are compared, with the goal of maximizing aggregated welfare in the former and regional welfare in the latter case. The main result is that under cooperation poorer regions are worse off in two respects. In the short-run they loose even more welfare and in the long-run sustainable agglomerations in richer regions get more likely. Thus, although cooperation could generate aggregated welfare gains the potential losers face even in the short-run no incentive to remove tariffs unless they are compensated appropriately, for instance by transfers. In this sense transfers from the rich to the poor are not only a policy to reach the goal of equity but also a necessary precondition to reach aggregated efficiency.

Suggested Citation

  • Matthias Ross, 2003. "The Impact of Optimal Tariffs and Taxes on Agglomeration," ERSA conference papers ersa03p102, European Regional Science Association.
    • Handle: RePEc:wiw:wiwrsa:ersa03p102
    as

    Download full text from publisher

    File URL: https://www-sre.wu.ac.at/ersa/ersaconfs/ersa03/cdrom/papers/102.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Brander, James A., 1995. "Strategic trade policy," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 27, pages 1395-1455, Elsevier.
    2. Masahisa Fujita & Paul Krugman & Anthony J. Venables, 2001. "The Spatial Economy: Cities, Regions, and International Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262561476, December.
    3. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-499, June.
    4. Fujita,Masahisa & Thisse,Jacques-François, 2013. "Economics of Agglomeration," Cambridge Books, Cambridge University Press, number 9781107001411, January.
    5. Gianmarco I.P. Ottaviano, 2000. "Ad usum delphini: A Primer in "New Economy Geography"," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 59(1), pages 89-116, April.
    6. Flam, Harry & Helpman, Elhanan, 1987. "Industrial policy under monopolistic competition," Journal of International Economics, Elsevier, vol. 22(1-2), pages 79-102, February.
    7. Gianmarco I. P. Ottaviano & Diego Puga, 1998. "Agglomeration in the Global Economy: A Survey of the ‘New Economic Geography’," The World Economy, Wiley Blackwell, vol. 21(6), pages 707-731, August.
    8. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
    9. Gianmarco Ottaviano & Takatoshi Tabuchi & Jacques-François Thisse, 2021. "Agglomeration And Trade Revisited," World Scientific Book Chapters, in: Firms and Workers in a Globalized World Larger Markets, Tougher Competition, chapter 3, pages 59-85, World Scientific Publishing Co. Pte. Ltd..
    10. Gros, Daniel, 1987. "A note on the optimal tariff, retaliation and the welfare loss from tariff wars in a framework with intra-industry trade," Journal of International Economics, Elsevier, vol. 23(3-4), pages 357-367, November.
    11. Forslid, Rikard, 1999. "Agglomeration with Human and Physical Capital: an Analytically Solvable Case," CEPR Discussion Papers 2102, C.E.P.R. Discussion Papers.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ross, Matthias, 2002. "The impact of optimal tariffs and taxes on agglomeration," HWWA Discussion Papers 212, Hamburg Institute of International Economics (HWWA).
    2. J.Peter Neary, 2001. "Of Hype and Hyperbolas: Introducing the New Economic Geography," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 536-561, June.
    3. Epifani, Paolo, 2005. "Heckscher-Ohlin and agglomeration," Regional Science and Urban Economics, Elsevier, vol. 35(6), pages 645-657, November.
    4. Baldwin, Richard E. & Krugman, Paul, 2004. "Agglomeration, integration and tax harmonisation," European Economic Review, Elsevier, vol. 48(1), pages 1-23, February.
    5. Ottaviano, Gianmarco & Lamorgese, Andrea & Tabuchi, Takatoshi & Behrens, Kristian, 2004. "Testing the Home Market Effect in a Multi-Country World: The Theory," CEPR Discussion Papers 4468, C.E.P.R. Discussion Papers.
    6. Kurt A. Hafner, 2015. "Tax Competition and Economic Integration," Review of Development Economics, Wiley Blackwell, vol. 19(1), pages 45-61, February.
    7. Kensuke Ohtake, 2021. "A continuous space model of new economic geography with a quasi-linear log utility function," Papers 2108.12217, arXiv.org, revised Aug 2023.
    8. Jens Suedekum, 2005. "Increasing returns and spatial unemployment disparities," Papers in Regional Science, Wiley Blackwell, vol. 84(2), pages 159-181, June.
    9. Kensuke Ohtake, 2021. "Agglomeration triggered by the effect of the number of regions: A model in NEG with a quadratic subutility," Papers 2112.02920, arXiv.org, revised Mar 2022.
    10. Marco Maffezzoli & Federico Trionfetti, "undated". "Approximation Methods: an Application to the Core-Periphery Model," Working Papers 219, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    11. Ugo Fratesi, 2008. "Regional policy from a supra-regional perspective," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 42(3), pages 681-703, September.
    12. José M. Gaspar, 2018. "A prospective review on New Economic Geography," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 61(2), pages 237-272, September.
    13. PICARD, Pierre & THISSE, Jacques-François & TOULEMONDE, Eric, 2002. "Economic geography and the role of profits," LIDAM Discussion Papers CORE 2002027, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    14. Ross, Matthias, 2002. "The Impact of Optimal Tariffs and Taxes on Agglomeration," Discussion Paper Series 26154, Hamburg Institute of International Economics.
    15. Robert-Nicoud, Frédéric, 2006. "Off-shoring of business services and de-industrialization: threat or opportunity - and for whom?," LSE Research Online Documents on Economics 19847, London School of Economics and Political Science, LSE Library.
    16. Richard E. Baldwin & Toshihiro Okubo, 2006. "Heterogeneous firms, agglomeration and economic geography: spatial selection and sorting," Journal of Economic Geography, Oxford University Press, vol. 6(3), pages 323-346, June.
    17. Paolo Guerrieri & Filippo Vergara Caffarelli, 2004. "International Fragmentation of Production and Euro-Med Integration," EUI-RSCAS Working Papers 28, European University Institute (EUI), Robert Schuman Centre of Advanced Studies (RSCAS).
    18. Luca, Spinesi, 2005. "Vertical and Horizontal Innovation : Effects of Globalization and Migration on Inequality, Growth and Human Capital Accumulation," Discussion Papers (ECON - Département des Sciences Economiques) 2005028, Université catholique de Louvain, Département des Sciences Economiques.
    19. Frédéric Robert-Nicoud, 2006. "Agglomeration and Trade with Input–Output Linkages and Capital Mobility," Spatial Economic Analysis, Taylor & Francis Journals, vol. 1(1), pages 101-126.
    20. Head, Keith & Mayer, Thierry, 2004. "The empirics of agglomeration and trade," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 59, pages 2609-2669, Elsevier.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wiw:wiwrsa:ersa03p102. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Gunther Maier (email available below). General contact details of provider: http://www.ersa.org .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.