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Title:Fiscal competition, convergence and agglomeration PDF Logo
Authors:Fenge, Robert
von Ehrlich, Maximilian
Wrede, Matthias
Issue Date:2007
Series/Report no.:CESifo working paper 2084
Abstract:This paper analyzes the impact of fiscal competition through infrastructure in a New Economic Geography framework. It is shown that regional competition leads to convergence if the trade costs are high but induces divergence if trade cost have fallen below a certain value. Moreover, fiscal competition yields an overprovision if the trade costs are sizable while it leads to underprovision if the regions are highly integrated. Finally, a trade-off between regional convergence and efficiency arises since the efficient distribution of regional infrastructure requires full agglomeration for sufficiently low trade costs.
JEL:F12
F15
H87
R12
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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