Public policies in the face of the mobility of goods and people: the contributions of regional economics and international trade.

Summary After a review of the New Geographical Economics (NEG) literature on location choices and public policies in a globalized economy, we focus our analysis on three different geographical levels: cities, nations and the European Union. We will analyze successively some specific public economy issues at these different levels. First, we address the issue of tax competition: within the theoretical framework of NEG, we show, first, that a race to the bottom is to be feared between small jurisdictions, and second, that a policy of tax harmonization in the direction of a floor tax for peripheral countries - a policy recommended by NEG and envisaged by the European Commission - tends not to be Pareto optimal. Then the theme of corruption: we analyze how a central government that captures the rent generated by entrepreneurs in the sector with increasing returns reacts to a drop in commercial costs. In particular, we will see under which conditions the bad governance of a government (measured by the amounts embezzled), can follow an inverted U curve under the effects of trade openness. Finally, we study the European Union's trade preferences: we show that these preferences were relatively well used in 2001, particularly by sub-Saharan African countries. For several of these countries, the value of the preferences represented a significant proportion of their world exports.