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...

We analyze non-cooperative commodity taxation in a symmetrictwo-country trade model characterized by monopolisticcompetition and international firm and capital mobility. In thissetting, taxes in one country affect foreign welfare through therelocation of mobile firms and through changes in the...

The paper compares non-cooperative commodity taxation under the destination and origin principles under a variety of different assumptions about market structure. We consider a model of international duopoly with either quantity or price competition of firms and either segmented or integrated...

This paper develops a model with an endogenous number of cities to explore whether local governments establish the optimal city size when key activities in the city are associated with emissions that harm consumers. In contrast to extant research, our model is fully micro-founded with respect to...

This paper develops a quantitative spatial general equilibrium model for the German economy to address two issues. First, we explore the role of commuting for local labor markets and their capacity to absorb productivity shocks. Second, we address the role of housing markets for quantitative...

We investigate whether time-persistent cultural borders impede economic exchange across regions of the same country. To measure cultural differences we evaluate, for the first time in economics, linguistic micro-data about phonological and grammatical features of German dialects. These data are...

In this paper we show that the double Pareto lognormal (DPLN) parameterization provides an excellent fit to the overall US city size distribution, regardless of whether "cities" are administratively defined Census places or economically defined area clusters. We then consider an economic model...

We analyze the first data set on consistently defined functional urban areas in Europe and compare the European to the US urban system. City sizes in Europe do not follow a power law: the largest cities are "too small" to follow Zipf's law.

Why are better educated and more risk-friendly persons more mobile across regions? To answer this question, we use micro data on internal migrants from the German Socio-Economic Panel (SOEP) 2000-2006 and merge this information with a unique proxy for region-pair-specific cultural distances...

We develop a theory of a firm in an incomplete contracts environment which decides on its complexity, organization, and global scale. Specifically, the firm decides i) how thinly it wants to slice its production process by choosing the mass of symmetric intermediate inputs that are...