The provision of public services and industrial location

In this paper we insert the public sector into Krugman's seminal core-periphery model, focusing on the provision of public services financed through taxes on rents. Since public services are an element that attracts economic activity, while taxes have the opposite effect, we find that the net effect of government becomes indeterminate and depends on the individual's subjective valuation of the public services provided. Moreover, the new parameters related with government in some cases modify Krugman's results.