Fiscal competition and regional differentiation |
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| Authors: | Moshe Justman, Jacques-Fran ois Thisse,Tanguy van Ypersele |
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| Affiliation: | aDepartment of Economics and Monaster Center for Economic Research, Ben Gurion University of the Negev, Beer Sheva, Israel;bCORE, Universite catholique de Louvain, Belgium;cCERAS, Ecole nationale des ponts, et chaussées, France;dCEPR, UK;eGREQAM, Chateau La Farge, Route des Milles, 13290 Les Milles, France |
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| Abstract: | Regions can benefit by offering infrastructure services that are differentiated. Competition between regions over potential investors is then less direct, allowing them to realize greater benefits from external investors. The two polar cases of full and incomplete information about investors' needs are studied. In both cases, there is regional differentiation. However, fiscal competition is efficient in the former case but not in the latter. Finally, it is shown that free entry in the location market calls for some regulation because of the excessive number of competing regions that would prevail in equilibrium. |
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| Keywords: | Fiscal competition Regional development Infrastructure Horizontal differentiation |
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