This paper explores the properties of pre-test strategies in estimating a linear Cliff-Ord-type spatial model when the researcher is unsure about the nature of the spatial dependence. More specifically, the paper explores the finite sample properties of the pre-test estimators introduced in...

This paper considers spatial autoregressive panel data models and extends their analysis to the case where the spatial coefficients differ across the spatial units. It derives conditions under which the spatial coefficients are identified and develops a quasi maximum likelihood (QML) estimation...

This paper analyses tax competition between a unionised and a non-unionised country for the location of an outside firm. We show that unionisation offers an extra incentive for the government to attract a foreign competitor to a concentrated domestic market, in order to affect the behaviour of...

This paper studies equilibrium unemployment in a two-region economy with matching frictions, where workers and jobs are free to move and wages are bargained over. Job-seekers choose between searching locally or searching in both regions. Search-matching externalities are amplified by the latter...

Many countries operate pronounced fiscal equalization schemes that shift tax revenue across jurisdictions. We use a general equilibrium model with multiple asymmetric regions, costly trade and labor mobility to carve out the aggregate implications of this policy. Calibrating the model for...

In this note, we show that labour market integration can be a double-edged sword. In the presence of local human capital externalities, integration and the ensuing agglomeration of skilled labour can cause a decline in human capital and the total wage sum (net of education costs). In particular,...

What are the dynamic consequences of comprehensive integration shocks? The answer to this question appears all but trivial. We set up a dynamic macroeconomic model of a small open economy where both capital and labor are mobile and there are increasing returns to scale at the aggregate level....