How to make the metropolitan area work? Neither big government, nor laissez-faire
(2013)
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- Abstract
- We study how political boundaries and tax competition among jurisdictions interact with the labor and land markets to determine the economic structure and performance of metropolitan areas. Contrary to general belief, institutional fragmentation and cross-border commuting need not be welfare-decreasing, but the size of the central city matters for welfare. Under tax competition the central business district is too small. Tax competition also prevents public policy enhancing global productivity to produce their full impact. Although our results support the idea of decentralizing the supply of local public services by independent jurisdictions, they also highlight the need of coordinating tax policies.
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Citations
Thisse, J.-F., Gaigné, C., & Riou, S. (2013). How to make the metropolitan area work? Neither big government, nor laissez-faire. https://hdl.handle.net/2078.5/200415