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Taking the Bite Out of Fiscal Competition

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  • Thisse, Jacques-François
  • Justman, Moshe
  • van Ypersele, Tanguy

Abstract

Regions can benefit by offering infrastructure services that are differentiated by quality, thus segmenting the market for industrial location. Regions that compete on infrastructure quality have an incentive to increase the degree of differentiation between them. This places an upper bound on the number of regions successfully able to participate in the location market, and limits the dissipation of regional surplus through Tiebout competition. It indicates a process of fiscal agglomeration, through which regional concentrations arise, which does not depend on the circular causation underlying much of the recent literature on economic geography.

Suggested Citation

  • Thisse, Jacques-François & Justman, Moshe & van Ypersele, Tanguy, 2001. "Taking the Bite Out of Fiscal Competition," CEPR Discussion Papers 3109, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:3109
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    1. Justman, Moshe & Thisse, Jacques-Francois & van Ypersele, Tanguy, 2005. "Fiscal competition and regional differentiation," Regional Science and Urban Economics, Elsevier, vol. 35(6), pages 848-861, November.
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    More about this item

    Keywords

    Fiscal competition; Regional development; Technological infrastructure; Vertical differentiation;
    All these keywords.

    JEL classification:

    • H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R58 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Regional Development Planning and Policy

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