Resource title

Three papers laying the foundation for regional CGE models with agglomeration characteristics

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Resource description

The paper analyses the effects of introducing taxes and regional transfers on the equilibriumproperties in a standard Core-Periphery model. A central government levies taxes on productionfactors and redistributes the revenue to all agents regardless of their location. In the caseof Core-Periphery economy this is in effect a re-allocation of agglomeration rents. Simulationsshow that taxes and transfers alter the Core-Periphery model’s properties by moving the Breakand Sustain points. The range of freeness of trade with Core-Periphery outcomes is reducedfor transfers to the periphery, and increased for transfers to the core. The width of the overlapwhere the models exhibit hysteresis effects remains the same regardless of the transfers. Theanalysis reveals that in the Core-Periphery outcome the agglomeration rents can be taxed withoutexhausting the core’s scale effects. The tax revenues can then be redistributed such thatperiphery regions and the central government have incentives in promoting core regions, whichfunction as industrial locomotives for the whole economy.

Resource author

Lars Brømsøe Termansen

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Resource publish date

Resource language

eng

Resource content type

application/pdf

Resource resource URL

http://hdl.handle.net/10398/8156

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