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IEB10-31_Gerritse.pdf (498.13 KB)

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Working paper

Publication date

2010

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cc-by-nc-nd, (c) Gerritse, 2010
Please use this identifier to cite or link to this item: https://hdl.handle.net/2445/116762

Policy competition and agglomeration: a local government view

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Abstract

This paper presents a model of local government policy competition in an New Economic Geography-setting. To maximize welfare, local governments can subsidize a mobile factor or provide public goods. In the local perspective, firms’ vertical linkages promote colocation and policy (subsidy) setting is simultaneous, giving rise to mixed profiles. Agglomeration benefits lead larger regions to set higher subsidies, preventing a race to the top. We show the results numerically as well as in an analytical case. In contrast to related literature, policy harmonization can be welfare-improving, mainly due simultaneous policy-setting with a (local) utilitarian objective.

Subject

Competència econòmica, Concentració industrial, Administració local, Béns públics

Subject (English)

Competition, Industrial concentration, Local government, Public goods

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IEB (Institut d’Economia de Barcelona) – Working Papers

Citation

GERRITSE, Michiel. Policy competition and agglomeration: a local government view. IEB Working Paper 2010/31. [consulted: 12 of August of 2026]. Available at: https://hdl.handle.net/2445/116762

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