Economic Geography and the Fiscal Effects of Regional Integration

Rodney Ludema and Ian Wooton ()

No 1822, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: In models of economic geography, plant-level scale economies and trade costs create incentives for spatial agglomeration of production into a manufacturing core and agricultural periphery, creating regional income differentials. We examine tax competition between national governments to influence the location of manufacturing activity. Labour is imperfectly mobile and governments impose redistributive taxes. Regional integration is modelled as either increased labour mobility or lower trade costs. We show that either type of integration may result in a decrease in the intensity of tax competition, and thus higher equilibrium taxes. Moreover, economic integration must increase taxes when the forces of agglomeration are the strongest.

Keywords: Economic Geography; Economic Integration; Factor Mobility; International Trade; Tax Competition (search for similar items in EconPapers)
JEL-codes: F12 F15 F22 H73 (search for similar items in EconPapers)
Date: 1998-03
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Citations: View citations in EconPapers (20)

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Related works:
Journal Article: Economic geography and the fiscal effects of regional integration (2000)
Working Paper: Economic Geography and the Fiscal Effects of Regional Integration (1998)
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