We analyze the role of optimal income taxation across different local labor markets. Should labor in large cities be taxed differently than in small cities? We find that a planner who needs to raise revenue and is constrained by free mobility of labor across cities does not choose equal taxes...

Since the early 1990s, there has been a renaissance in the study of regional growth, spurred by new models, methods and data. We survey a range of modelling traditions, and some formal approaches to the ’hard problem’ of regional economics, namely the joint consideration of agglomeration and...

This paper proposes a simple theory of a system of cities that decomposes the determinants of the city size distribution into three main components: efficiency, amenities, and frictions. Higher efficiency and better amenities lead to larger cities, but also to greater frictions through...

The Henry George Theorem (HGT), or the golden rule of local public finance, states that, in first-best economies, the fiscal surplus, defined as aggregate land rents minus aggregate losses from increasing returns to scale activities, is zero at optimal city sizes. We derive a general second-best...

We study the impact of regional and sectoral productivity changes on the U.S. economy. To that end, we consider an environment that captures the effects of interregional and intersectoral trade in propagating disaggregated productivity changes at the level of a sector in a given U.S. state to...

This Paper studies the theoretical micro-foundations of urban agglomeration economies. We distinguish three types of micro-foundations, based on sharing, matching, and learning mechanisms. For each of these three categories, we develop one or more core models in detail and discuss the literature...

We show in the framework of a new economic geography model that when labour is heterogenous and productivity depends on the quality of the match between job and worker, trade liberalization may lead to industrial agglomeration and inter-industry trade. The agglomeration force is the improvement...

Despite substantial regional expenditures at both national and community level, European regional policies do not appear to deliver. The evidence suggests that neither efficiency gains nor reduced regional inequalities are attained. If there is any positive impact at all, then it is at the most...

We investigate the role of skill heterogeneity in explaining location patterns induced by pecuniary externalities (Krugman (1991)). In our setting, sellers with higher skills perform better in the marketplace, and their sales are larger. Selling to distant locations leads to lower sales because...

European regions have experienced a polarisation of their unemployment rates between 1986 and 1996, as regions with intermediate rates have moved towards either extreme. This process has been driven by changes in regional employment, only partly offset by labour force changes. Regions' outcomes...