Koh, Hyun-Ju and Riedel, Nadine (2010) Do Governments Tax Agglomeration Rents? Centre for Business Taxation WP 10/04.
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Using the German local business tax as a testing ground, we empirically investigate the impact of firm agglomeration on municipal tax setting behavior. The analysis exploits a rich data source on the population of German firms to construct detailed measures for the communities' agglomeration characteristics. The findings indicate that urbanization and localization economies exert a positive impact on the jurisdictional tax rate choice which confirms predictions of the theoretical New Economic Geography (NEG) literature. Further analysis suggests a qualification of the NEG argument by showing that a municipality's potential to tax agglomeration rents depends on its firm and industry agglomeration relative to neighboring communities. To account for potential endogeneity problems, our analysis exploits long-lagged population and infrastructure variables as instruments for the agglomeration measures.
|Item Type:||Other Working Paper|
|Keywords:||agglomeration rents, corporate taxation, regional differentiation|
|Centre:||Oxford University Centre for Business Taxation > CBT Working Papers|
|Date Deposited:||25 Apr 2012 11:52|
|Last Modified:||15 Oct 2015 02:18|
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