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Economic Geography and the Fiscal Effects of Regional Integration

Author

Listed:
  • Rodney D. Ludema

    (Georgetown University)

  • Ian Wooton

    (University of Glasgow)

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 modeled 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.

Suggested Citation

  • Rodney D. Ludema & Ian Wooton, 1998. "Economic Geography and the Fiscal Effects of Regional Integration," International Trade 9801001, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpit:9801001
    Note: Type of Document - MS Word; prepared on IBM PC ; to print on HP; pages: 38 ; figures: included. * Drafts of this paper have been presented at the European Science Foundation conference on Migration and Development, Mont Ste-Odile, May 1996; a Workshop on International Trade and Factor Movements between Distorted Economies held by the University of Konstanz, July 1996; the annual meeting of the American Economic Association, New Orleans, January 1997; the Midwest International Economics conference, May 1997; and workshops at EPRU, Copenhagen in July 1997 and the Tinbergen Institute, Rotterdam in November 1997. We are grateful to participants for their comments and suggestions.
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    References listed on IDEAS

    as
    1. Ludema, Rodney D & Wooton, Ian, 1997. "Regional Integration, Trade, and Migration: Are Demand Linkages Relevant in Europe?," CEPR Discussion Papers 1656, C.E.P.R. Discussion Papers.
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    More about this item

    Keywords

    economic integration; economic geography; factor mobility; international trade; tax competition;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F15 - International Economics - - Trade - - - Economic Integration
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects

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