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.
Full text available as:
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
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.
Document type
Monograph
(Working Paper)
Creators
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
URI
Other metadata
Document type
Monograph
(Working Paper)
Creators
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
URI
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