This thesis is centered on the interaction between fiscal policy and economic integration. It studies the effect of spending policies and budgetary policies on the economic landscape.

It is argued that an appropriate pattern of government spending may be an effective instrument with which to shaping the economic landscape. This pattern of spending has two major effects: (1) it stabilizes the equilibrium location economic activity and (2) it influences the steady state distribution of economic activity.

The thesis also investigate the effect of budgetary policies. To this purpose it stylizes the process of economic integration as being a three stages process: market integration, fiscal convergence, free mobility of factors.

It is found that the order in which these steps are taken is crucial to the outcome. In particular, fiscal converge should be implemented before market integration and not after as it seems to be happening in Europe.