| This dissertation focuses on the dynamics of multi-region economies and the effects of fiscal policies under different types of institutional arrangements, such as fiscal competition, cooperation or cohesion policies. The first part considers the effects of coordination and competition at the level of public policy in integrated economies, such as economic unions. I show that, despite being optimal in the long run, perfect policy coordination may decrease the welfare of the currently living generations compared to the case of non-cooperation or partial coordination and thus, it may not be implementable. I analyze how the implementability of coordinated policies depends on the number of countries in the union, the social welfare weights of each generation and the degree of openness with respect to the rest of the world. The second part focuses on the growth effects of spatial redistribution policies. Regional income disparities have increased in many European countries during the last three decades, even as national and supra-national policy instruments were created to correct them. I study this issue in a two-region, two-sector model with migration and public investment in infrastructure and education. The model's outcomes are consistent with the observed regional disparities, both in cross-section and over time, also accounting for national and supranational policies. The model is then used to provide quantitative and qualitative assessments of these policies. The third part analyzes the spatial correlation of regional output by separating the effects of trade flows and knowledge spillovers. Allowing both the knowledge production and the trade flows to vary across space enables a direct comparison of the forces that cause agglomeration versus dispersion in economic activity, and thus a way to test the role the transportation cost plays in generating these phenomena. I estimate the theoretical model on a sample of European regions. The results support the hypothesis that knowledge and trade flows have distinct effects on regional productivity. I also find that knowledge spillovers are most likely to occur between a region and its closest three neighbors, while most trade flows are likely limited to the closest five neighbors. |
