Footloose Entrepreneurs, Taxes and Subsidies

Pasquale Commendatore, Martin Currie and Ingrid Kubin ()

Spatial Economic Analysis, 2008, vol. 3, issue 1, 115-141

Abstract: Abstract This paper challenges the robustness of policy propositions of the New Economic Geography. Simply altering the temporal framework of the Footloose Entrepreneur model implies that the system can exhibit periodic cycles, chaotic orbits or agglomeration. Minute changes in a tax or subsidy rate can have dramatic, unpredictable and/or irreversible repercussions on the spatial location of manufacturing industry and on social welfare. The complexity of the dynamics is likely to be exacerbated by competition between governments employing subsidies to attract or retain entrepreneurs. The possibility of complex dynamical behaviour is not eliminated by assuming that entrepreneurs are ‘rational’.

Keywords: New Economic Geography; Footloose Entrepreneurs; taxation; chaotic dynamics; F20; R1; R12 (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (14)

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Working Paper: Footloose Entrepreneurs, Taxes and Subsidies (2005)
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DOI: 10.1080/17421770701774914

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