This paper presents a New Economic Geography model with distortionary taxation and endogenized trade costs. Tax revenues finance a public good, infrastructure. We show that the introduction of costly public investment in infrastructure increases agglomerative tendencies. With respect to the...

Using a natural experiment from Germany, we show that temporary place-based subsidies generate persistent effects on economic density. We identify employment and capital formation as main channels for higher income per square kilometer. As the spatial regression discontinuity design allows us to...

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 a natural experiment from Germany, we show that temporary place-based subsidies generate persistent effects on economic density. We identify employment and capital formation as main channels for higher income per square kilometer. As the spatial regression discontinuity design allows us to...

Using a natural experiment from Germany, we show that temporary placebased subsidies generate persistent effects on economic density. We identify employment and capital formation as main channels for higher income per square kilometer. As the spatial regression discontinuity design allows us to...

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...

This paper analyzes the effects of different corporate tax systems on the location of industry within an economic geography model with regional size asymmetries. Both the North and the South gain industry by adopting a tax regime that produces the lowest tax level. As the share of expenditures...

This article provides theoretical and empirical evidence that local fiscal competition generates a bias toward low business tax rates. Furthermore, it is shown that this bias is stronger for smaller jurisdictions. First, a theoretical model is settled with private and public capital and a fixed...

In this paper, we provide novel evidence on the contemporaneous and persistent effects of regional policy. We apply a quasi-experimental identification strategy exploiting the fact that municipalities in the West-German Zonenrandgebiet (ZRG) were eligible for substantial regional transfers...

This paper presents a New Economic Geography model with distortionary taxation and endogenized transport costs. Tax revenues finance a public good, infrastructure. We show that the introduction of costly public investment in infrastructure leads to more pronounced agglomeration patterns. With...