Do Governments Tax Agglomeration Rents?
By Hyun-Ju Koh, Nadine Riedel. Social Science Research Network, 2013
184 citations recorded by the source corpus.
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.
Subfields: Accounting, Economics and Econometrics, Political Science and International Relations
View Paper: https://www.semanticscholar.org/paper/493c6f4c8de25fa84038c39ff4b53853b9be7cd7
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Citations in the corpus
- Population density and urban air quality (2021, background): “Koh et al. (2013) and Redding and Sturm (2008) who use similar historical data for Germany.”