If one cluster increases local competitiveness, can politicians, by interlinking clusters, achieve an even better effect at the state level? To answer this question, the paper analyzes the Cluster Initiativeʺ introduced in 1999 by the Bavarian State Government. The purpose of the initiative was...

This paper shows that subsidy competition may be efficiency enhancing. We model a subsidy game among two asymmetric regions in a new trade model, where capital can freely move among regions, but capital rewards are repatriated. We study subsidy competition, starting from an equilibrium where the...

Using the German local business tax as a testing ground, we empirically investigate the impact of firm agglomeration on municipal tax setting behavior. The analysis exploits a rich data source on the population of German firms to construct detailed measures for the communities' agglomeration...

We develop a heterogeneous-firms model with trade in goods, labor mobility and credit constraints due to moral hazard. Mitigating financial frictions reduces the incentive of high-skilled workers to migrate to one region such that an unequal distribution of industrial activity becomes less...

We empirically investigate the existence of spatial autocorrelation between military dictatorships in Sub-Saharan Africa from 1977 through 2007. We apply a Bayesian SAR probit regression, extended to a pooled model. We find a robust and positive spatial autocorrelation coefficient, which shows a...

Applying the methodology developed by Duranton and Overman (2005, 2008), we analyze localization and dispersion of firms in China. Using a unique and detailed dataset on manufacturing firms in China, we are able to follow the changes in location patterns of firms between 2002 and 2008. Our...