Do governments tax agglomeration rents?

Koh, Hyun-Ju; Riedel, Nadine

doi:10.1016/j.jue.2012.11.004

Cited by 32 publications

(38 citation statements)

References 55 publications

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“…We show that, under mild conditions, the central city typically levies a higher business tax than suburban governments, a result that is backed up by the empirical literature (see Koh et al, (2013) and Brülhart et al (2015) for references). The reason for this is that consumers working in the central city need not reside therein, which incentivizes the central city's government to practice tax exporting, the extent of which depends on the relative size of jurisdictions and the intensity of agglomeration economies.…”

Section: Introductionsupporting

confidence: 67%

How to make the metropolitan area work? Neither big government, nor laissez-faire

Gaigné

Riou

2016

Journal of Public Economics

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We study how administrative boundaries and tax competition among asymmetric jurisdictions interact with the labor and land markets to determine the economic structure and performance of metropolitan areas. Contrary to general belief, cross-border commuting need not be welfare-decreasing in presence of agglomeration economies that vary with the distribution of …rms within the metropolitan area. Tax competition implies that the central business district is too small and prevents public policy enhancing global productivity to produce their full impact. Although our results support the idea of decentralizing the provision of local public services by independent jurisdictions, they highlight the need of coordinating tax policies and the importance of the jurisdiction sizes within metropolitan areas.

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Section: Introductionsupporting

confidence: 67%

How to make the metropolitan area work? Neither big government, nor laissez-faire

Gaigné

Riou

2016

Journal of Public Economics

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“…7 Count models of firm location have subsequently been estimated by List (2001), Guimaraes et al (2003) and Holl (2004). 8 In a related strand of recent research, Charlot and Paty (2007), Jofre-Monseny and Solé-Ollé (2010, 2012), Koh and Riedel (2010), Jofre-Monseny (forthcoming) and Lü thi and Schmidheiny (2011)) have found that local tax rates are positively correlated with measures of local agglomeration.…”

Section: Literature Backgroundmentioning

confidence: 99%

Do Agglomeration Economies Reduce the Sensitivity of Firm Location to Tax Differentials?

Brülhart

Jametti

Schmidheiny

2012

The Economic Journal

122

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Low corporate taxes can help attract new …rms. This is the main mechanism underpinning the standard 'race-to-the-bottom'view of tax competition. A recent theoretical literature has quali…ed this view by formalizing the argument that agglomeration forces can reduce …rms' sensitivity to tax di¤erentials across locations. We test this proposition using data on …rm startups across Swiss municipalities. We …nd that, on average, high corporate income taxes do deter new …rms, but that this relationship is signi…cantly weaker in the most spatially concentrated sectors. Location choices of …rms in sectors with an agglomeration intensity at the twentieth percentile of the sample distribution are estimated to be twice as responsive to a given di¤erence in local corporate tax burdens as …rms in sectors with an agglomeration intensity at the eightieth percentile. Hence, our analysis con…rms the theoretical prediction: agglomeration economies can neutralize the impact of tax di¤erentials on …rms'location choices.JEL Classi…cation: R3, H32

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“…Neighbors are thereby defined as two jurisdictions that share a border (e.g., Heyndels and Vuchelen, ; Geys, ; Rincke, ) or are within a certain Euclidian or travel distance from each other (e.g., Buettner, , 2003; Bosch and Solé‐Ollé, ; Brett and Tardiff, ). In a similar vein, the inverse of the distance between jurisdictions is often invoked to approximate the strength of the assumed competitive relation between them (e.g., Brueckner and Saavedra, ; Charlot and Paty, ; Koh, Riedel, and Böhm, ). Such distance‐based criteria can be justified by the fact that proximity is important for the dissemination of information—certainly at the local government level (Allers and Elhorst, )—and is linked to relocation decisions of both individuals (Day, ) and firms (van Dijk and Pellenbarg, )…”

Section: Literature Overview and Hypothesesmentioning

confidence: 99%

Borders as Boundaries to Fiscal Policy Interactions? An Empirical Analysis of Politicians’ Opinions on Rivals in the Competition for Firms

Geys

Osterloh

2013

Journal of Regional Science

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Discussion papers of the WZB serve to disseminate the research results of work in progress prior to publication to encourage the exchange of ideas and academic debate. Inclusion of a paper in the discussion paper series does not constitute publication and should not limit publication in any other venue. The discussion papers published by the WZB represent the views of the respective author(s) and not of the institute as a whole. Terms of use: Documents in Copyright remains with the author(s). Abstract Borders as Boundaries to Fiscal Policy Interactions? An Empirical Analysis of Politicians' Opinions on Rivals in the Competition for FirmsBenny Geys and Steffen Osterloh Studies of spatial policy interdependence in (local) public policies usually concentrate on the relations between jurisdictions within a single analysed region, and disregard possible extra-regional effects. However, the theoretical spatial statistics literature shows that biased estimates might emerge if spatial interactions extend beyond the boundaries of the available data (i.e., the boundary value problem). This paper empirically assesses the practical relevance of this concern by studying German local politicians' assessments of their jurisdictions' main competitors in the struggle to attract firms. We find that location near a border significantly undermines politicians' perception that the fiercest competitive pressure derives from jurisdictions within their own state. This effect sets in about 20km (10.2km) from a national (international) border. These results indicate that nearest municipalities perceive each other as competitors regardless of the state or country where they are located, which has important implications for estimating spatial dependence models.

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Do governments tax agglomeration rents?

Cited by 32 publications

References 55 publications

How to make the metropolitan area work? Neither big government, nor laissez-faire

How to make the metropolitan area work? Neither big government, nor laissez-faire

Do Agglomeration Economies Reduce the Sensitivity of Firm Location to Tax Differentials?

Borders as Boundaries to Fiscal Policy Interactions? An Empirical Analysis of Politicians’ Opinions on Rivals in the Competition for Firms

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