scholarly journals Interregional Competition for Mobile Creative Capital With and Without Physical Capital Mobility

2021 ◽  
Author(s):  
Amitrajeet A. Batabyal ◽  
Peter Nijkamp
Keyword(s):  
Capital Mobility ◽  
Physical Capital ◽  
Creative Capital

scholarly journals Interregional Competition for Mobile Creative Capital with and Without Physical Capital Mobility

2021 ◽  
pp. 016001762199522
Author(s):  
Amitrajeet A. Batabyal ◽  
Peter Nijkamp
Keyword(s):  
Capital Mobility ◽  
Physical Capital ◽  
Creative Class ◽  
Tax Policies ◽  
Extant Literature ◽  
Tax Subsidy ◽  
Final Good ◽  
First Case ◽  
Creative Capital ◽  
Optimal Taxes

A lacuna in the extant literature and our desire to contribute to the theoretical literature on how tax/subsidy policies can be used by regions to attract the creative class together provide the motivation for this paper. The paper’s basic contribution is that it is the first to theoretically analyze competition between two regions (1 and 2) for mobile creative capital, the key attribute possessed by the creative class. Both regions produce a final good using creative and physical capital. In the first case, physical capital is immobile and only region 2 uses tax policy to attract the mobile creative capital. We compute the equilibrium returns to creative and physical capital, we specify a key condition for creative capital in the aggregate economy, and we show which of three tax policies gives region 2 the highest income. In the second case, creative and physical capital are mobile and both regions pursue tax policies to attract mobile creative capital. Once again, we compute the equilibrium returns to creative and physical capital and then describe the optimal taxes for the two regions given that they wish to maximize regional income.

scholarly journals The Response of Creative Class Members to Regions Vying to Attract Them With Subsidies

2022 ◽  
pp. 016001762110618
Author(s):  
Amitrajeet A. Batabyal ◽  
Hamid Beladi
Keyword(s):  
Physical Capital ◽  
Creative Class ◽  
Plant Location ◽  
Theoretical Studies ◽  
Location Decision ◽  
Jel Codes ◽  
Class Member ◽  
Creative Capital ◽  
Regional Location ◽  
Regional Authorities

There are no theoretical studies in regional science that examine which region to locate in from the standpoint of a creative class member, given that the pertinent regional authorities (RAs) are competing among themselves to attract the creative class using subsidies. This gap provides the motivation for our paper. This paper’s contribution is that it is the first to theoretically study the regional location choice of creative class members when the RAs of the locations in which they might locate are using subsidies to attract them. Specifically, a knowledge good producing creative class member must decide which of two regions ( A or B) to locate his plant in. This good is produced using a Cobb–Douglas function with creative and physical capital. We analyze plant location in four cases. In the benchmark case, we show that the representative creative class member ought to locate his plant in the less expensive region B. Next, we show that a small subsidy to creative capital by region A switches the plant location decision from region B to A. Finally, when both regions grant identical subsidies to creative capital, the representative creative class member is indifferent between locating in regions A and B. So, for identical subsidies to affect the plant location decision, they are better targeted to physical and not to creative capital. JEL Codes: R11, R58

Global Markets and National Politics: Collision Course or Virtuous Circle?

1998 ◽  
Vol 52 (4) ◽  
pp. 787-824 ◽  
Author(s):  
Geoffrey Garrett
Keyword(s):  
Interest Rates ◽  
Social Services ◽  
Capital Mobility ◽  
Global Economy ◽  
Physical Capital ◽  
Market Uncertainty ◽  
National Politics ◽  
Transfer Programs ◽  
Political Incentives ◽  
Public Economies

Increasing exposure to trade, foreign direct investment, and liquid capital mobility have not prompted a pervasive policy race to the neoliberal bottom among the OECD countries. One reason is that there are strong political incentives for governments to cushion the dislocations and risk generated by openness. Moreover, countries with large and expanding public economies (when balanced with increased revenues, even from capital taxes) have not suffered from capital flight or higher interest rates. This is because the modern welfare state, comprising income transfer programs and publicly provided social services, generates economically important collective goods that are undersupplied by markets and that actors are interested in productivity value. These range from the accumulation of human and physical capital to social stability under conditions of high market uncertainty to popular support for the market economy itself. As a result, arguments about the demise of national autonomy in the global economy are considerably overdrawn.

Physical capital stock, technological upgrading and modernisation in Hungary

2005 ◽  
Vol 55 (2) ◽  
pp. 201-221 ◽  
Author(s):  
Andrea Szalavetz
Keyword(s):  
Capital Accumulation ◽  
Physical Capital ◽  
Developed Countries ◽  
Point Of View ◽  
Technology Generation ◽  
Development Policies ◽  
Specific Factors ◽  
Physical Capital Accumulation

This paper discusses the relation between the quality and quantity indicators of physical capital and modernisation. While international academic literature emphasises the role of intangible factors enabling technology generation and absorption rather than that of physical capital accumulation, this paper argues that the quantity and quality of physical capital are important modernisation factors, particularly in the case of small, undercapitalised countries that recently integrated into the world economy. The paper shows that in Hungary, as opposed to developed countries, the technological upgrading of capital assets was not necessarily accompanied by the upgrading of human capital i.e. the thesis of capital skill complementarity did not apply to the first decade of transformation and capital accumulation in Hungary. Finally, the paper shows that there are large differences between the average technological levels of individual industries. The dualism of the Hungarian economy, which is also manifest in terms of differences in the size of individual industries' technological gaps, is a disadvantage from the point of view of competitiveness. The increasing differences in the size of the technological gaps can be explained not only with industry-specific factors, but also with the weakness of technology and regional development policies, as well as with institutional deficiencies.

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