Author: Hikaru OGAWA, Taiki SUSA
This paper shares the interests on the design of municipal borders with the latter and aims to provide further insight into the endogenous determination of municipal borders when countries face market integration in a global economy. To capture the effect of globalization, openness to trade has been incorporated in the analyses of (dis)integration (Alesina, Spolaore, and Wacziarg, 2000; Casella and Feinstein, 2002; Etro, 2006). In this paper, we use an alternative and more elaborate strategy to deal with the effect of globalization on mergers. While most of the models define openness to trade in an ad hoc manner by pushing aside the production sector, this paper incorporates more realistic production activities into the model, focusing on the interregional mobility of production factors. For this purpose, in this paper, we integrate the municipal merger model with the canonical model of tax competition, and the paper explicitly deals with production, capital mobility, and distorting taxation. Integration
of the two approaches is quite natural, and is useful for analyzing the effects of globalization on the design of domestic jurisdictions.
Read more: Municipal Merger and Tax Competition