Productive Public Expenditure in a New Economic Geography Model

Pasquale Commendatore (), Ingrid Kubin () and Carmelo Petraglia ()

MPRA Paper from University Library of Munich, Germany

Abstract: We assess whether and how differences in productive public expenditure impacts on industrial location. Since productive public expenditure and taxation affect in opposite direction industrial location, it is not straightforward that following an increase in productive public expenditure in a region, that region will necessarily enjoy stronger agglomeration. As a major contribution to the literature, we consider jointly two effects arising from public policy: the demand effect and the productivity effect. The interplay of these two effects determines the final impact on the spatial distribution of firms. The result is influenced by the proportion in which tax payers of the two regions contribute to the financing of public expenditure.

Keywords: economic geography; public expenditure; footloose capital (search for similar items in EconPapers)
JEL-codes: F20 H5 R12 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-geo, nep-pbe and nep-ure
Date: 2007-04

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Related works:
Journal Article: Productive Public Expenditure in a New Economic Geography Model (2008)
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Persistent link: http://EconPapers.repec.org/RePEc:pra:mprapa:5824

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