Taxation, Infrastructure, and Endogenous Trade Costs in New Economic Geography

Gruber, Stefan ; Marattin, Luigi (2009) Taxation, Infrastructure, and Endogenous Trade Costs in New Economic Geography. Bologna: Dipartimento di Scienze economiche DSE, p. 35. DOI 10.6092/unibo/amsacta/4578. In: Quaderni - Working Paper DSE (668). ISSN 2282-6483.
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Abstract

This paper presents a New Economic Geography model with distortionary taxation and endogenized trade costs. Tax revenues finance a public good, infrastructure. We show that the introduction of costly public investment in infrastructure increases agglomerative tendencies. With respect to the regions' sizes, in the periphery, the price-index for manufacturing goods decreases, whereas for the core, the price-index is rather high since the distortionary effect of taxes dominates. 'Free riding' ¡ or, in terms of regional policy, externally funded infrastructure investment; is beneficial for the periphery, which can devote all its tax revenue to local demand support, generating a positive home market effect and driving the catch-up process.

Abstract
Document type
Monograph (Working Paper)
Creators
CreatorsAffiliationORCID
Gruber, Stefan
Marattin, Luigi
Keywords
New Economic Geography, Taxation, Endogenous Trade Costs, Infrastructure, Regional Policy
Subjects
ISSN
2282-6483
DOI
Deposit date
11 Feb 2016 12:03
Last modified
11 Feb 2016 12:03
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