Taking the Bite Out of Fiscal Competition

33 Pages Posted: 15 Jan 2002

See all articles by Moshe Justman

Moshe Justman

Ben-Gurion University of the Negev - Department of Economics; University of Melbourne - Melbourne Institute of Applied Economic and Social Research

Jacques-François Thisse

Catholic University of Louvain (UCL); Centre for Economic Policy Research (CEPR)

Tanguy Van Ypersele

National Center for Scientific Research (CNRS) - Research Group in Quantitative Saving (GREQAM); Centre for Economic Policy Research (CEPR)

Date Written: December 2001

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.

Keywords: Fiscal competition, regional development, technological infrastructure, vertical differentiation

JEL Classification: H73, O38, R12, R58

Suggested Citation

Justman, Moshe and Thisse, Jacques-François and Van Ypersele, Tanguy, Taking the Bite Out of Fiscal Competition (December 2001). CEPR Discussion Paper No. 3109. Available at SSRN: https://ssrn.com/abstract=296863

Moshe Justman (Contact Author)

Ben-Gurion University of the Negev - Department of Economics ( email )

Beer-Sheva 84105
Israel
+972 864 72292 (Phone)
+972 864 72941 (Fax)

University of Melbourne - Melbourne Institute of Applied Economic and Social Research ( email )

Level 5, FBE Building, 111 Barry Street
Parkville, Victoria 3010
Australia

Jacques-François Thisse

Catholic University of Louvain (UCL) ( email )

Place des Doyens 1
Louvain-la-Neuve, 1348
Belgium

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Tanguy Van Ypersele

National Center for Scientific Research (CNRS) - Research Group in Quantitative Saving (GREQAM) ( email )

Centre de la Vieille Charité
2 rue de la Charité
Marseille, 13002
France
+33 4 4293 5983 (Phone)
+33 4 4293 0968 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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