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Productive Public Expenditure in a New Economic Geography Model

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  • Commendatore, Pasquale
  • Kubin, Ingrid
  • Petraglia, Carmelo

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.

Suggested Citation

  • Commendatore, Pasquale & Kubin, Ingrid & Petraglia, Carmelo, 2007. "Productive Public Expenditure in a New Economic Geography Model," MPRA Paper 5824, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:5824
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    References listed on IDEAS

    as
    1. Philippe Martin & Gianmarco I.P. Ottaviano, 2021. "Growing locations: Industry location in a model of endogenous growth," World Scientific Book Chapters, in: Firms and Workers in a Globalized World Larger Markets, Tougher Competition, chapter 1, pages 3-24, World Scientific Publishing Co. Pte. Ltd..
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    7. Vincent Dupont & Philippe Martin, 2006. "Subsidies to poor regions and inequalities: some unpleasant arithmetic," Journal of Economic Geography, Oxford University Press, vol. 6(2), pages 223-240, April.
    8. Borck, Rainald & Pfluger, Michael, 2006. "Agglomeration and tax competition," European Economic Review, Elsevier, vol. 50(3), pages 647-668, April.
    9. Rikard Forslid & Gianmarco I.P. Ottaviano, 2003. "An analytically solvable core-periphery model," Journal of Economic Geography, Oxford University Press, vol. 3(3), pages 229-240, July.
    10. Martin, Philippe & Ottaviano, Gianmarco I P, 2001. "Growth and Agglomeration," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(4), pages 947-968, November.
    11. Brulhart, Marius & Trionfetti, Federico, 2004. "Public expenditure, international specialisation and agglomeration," European Economic Review, Elsevier, vol. 48(4), pages 851-881, August.
    12. Pasquale Commendatore & Martin Currie & Ingrid Kubin, 2008. "Footloose Entrepreneurs, Taxes and Subsidies," Spatial Economic Analysis, Taylor & Francis Journals, vol. 3(1), pages 115-141.
    13. Commendatore, P. & Kubin, I., 2006. "Taxation on Agglomeration," CeNDEF Working Papers 06-08, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
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    Cited by:

    1. Michiel Gerritse, 2010. "Policy competition and agglomeration: a local government view," Working Papers 2010/31, Institut d'Economia de Barcelona (IEB).
    2. Pasquale Commendatore & Ingrid Kubin, 2016. "Source versus residence: A comparison from a new economic geography perspective," Papers in Regional Science, Wiley Blackwell, vol. 95(2), pages 201-222, June.
    3. Gerritse, Michiel, 2014. "Competing for firms under agglomeration: Policy timing and welfare," Regional Science and Urban Economics, Elsevier, vol. 49(C), pages 48-57.
    4. Stefan Wrzaczek, 2014. "Social optimality in the constructed-capital model," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 22(1), pages 211-232, March.
    5. Pasquale Commendatore & Ingrid Kubin & Carmelo Petraglia, 2009. "Footloose Capital and Productive Public Services," Chapters, in: Neri Salvadori & Pasquale Commendatore & Massimo Tamberi (ed.), Geography, Structural Change and Economic Development, chapter 1, Edward Elgar Publishing.
    6. Ingrid Kubin & Laura Gardini, 2022. "On the significance of borders: the emergence of endogenous dynamics," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 17(1), pages 41-62, January.
    7. Rhydian James & Peter Midmore & Dennis Thomas, 2012. "Public Sector Size and Peripherality," Spatial Economic Analysis, Taylor & Francis Journals, vol. 7(4), pages 447-460, December.
    8. Radi, Davide & Lamantia, Fabio & Italo Bischi, Gian, 2021. "Offshoring, Reshoring, Unemployment, And Wage Dynamics In A Two-Country Evolutionary Model," Macroeconomic Dynamics, Cambridge University Press, vol. 25(3), pages 705-732, April.
    9. Michiel Gerritse, 2010. "Policy competition and agglomeration: a local government view," Working Papers 2010/31, Institut d'Economia de Barcelona (IEB).

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    More about this item

    Keywords

    economic geography; public expenditure; footloose capital;
    All these keywords.

    JEL classification:

    • F20 - International Economics - - International Factor Movements and International Business - - - General
    • H5 - Public Economics - - National Government Expenditures and Related Policies
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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