Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/159509
Authors: 
Gruber, Stefan
Marattin, Luigi
Year of Publication: 
2009
Series/Report no.: 
Quaderni - Working Paper DSE 668
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.
JEL: 
F12
H25
H54
R12
Persistent Identifier of the first edition: 
Creative Commons License: 
https://creativecommons.org/licenses/by-nc/3.0/
Document Type: 
Working Paper

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