Taxation, Public Expenditures and Agglomeration

Pasquale Commendatore and Ingrid Kubin ()

Economia politica, 2013, issue 3, 357-386

Abstract: Recently, issues of international taxation have also been analysed from a New Economic Geographyperspective. These discussions show that adding agglomerative forces can change the results considerably.In our paper, we introduce a public sector into a Footloose Capital model: Capital income is taxed accordingto the residence principle and any tax revenue is spent for providing a public commodity. Thus,public policy changes the sectoral split of total expenditures, which is central for determining internationalfactor rewards and thus for factor mobility.We modeled this factor mobility process - along the lines of a replicator dynamics - in discrete timeand studied its local and global properties. We showed that multiple equilibria are possible, involvingcyclical and chaotic attractors; and that the basins of attraction may exhibit a highly complex structure. Inthat environment, the long run outcome of the dynamics process may depended highly sensitive to initialconditions and/or parameters. Public policy trying to attract industrial capital to one country may triggera dynamic process actually leading to agglomeration in the other country.

Date: 2013
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.rivisteweb.it/download/article/10.1428/75298 (application/pdf)
https://www.rivisteweb.it/doi/10.1428/75298 (text/html)
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mul:jb33yl:doi:10.1428/75298:y:2013:i:3:p:357-386

Access Statistics for this article

Economia politica is currently edited by Alberto Quadrio Curzio, Giorgio Lunghini, Pier Carlo Nicola

More articles in Economia politica from Società editrice il Mulino
Bibliographic data for series maintained by ().