The Effect of Agglomeration Size on Local Taxes

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The Effect of Agglomeration Size on Local Taxes

JournalArticle (Originalarbeit in einer wissenschaftlichen Zeitschrift)

ID	2290465
Author(s)	Luthi, Eva; Schmidheiny, Kurt
Author(s) at UniBasel	Schmidheiny, Kurt
Year	2013
Title	The Effect of Agglomeration Size on Local Taxes
Journal	Journal of Economic Geography
Volume	14
Number	2
Pages / Article-Number	265-287
Abstract	Standard tax competition models predict a ‘race-to-the-bottom’ of corporate tax rates when firms are mobile. Recent theoretical literature shows that central regions with large clusters of economic activity are able to set positive tax rates without fear of losing firms to peripheral regions as the firms would forego ‘rents’ from agglomeration economies. We study whether local policy makers effectively tax such agglomeration rents. We test this with data from Swiss municipalities. We find that municipalities in large urban areas indeed set higher tax rates than those in small ones. Within urban areas, however, municipal tax rates are unrelated to the size of economic activity in and around municipalities while they are positively related to the size of the political jurisdiction. We see this result as evidence that the standard tax competition model for asymmetric jurisdictions is at work in the competition of municipalities within an urban area.
Publisher	Oxford University Press
ISSN/ISBN	1468-2702 ; 1468-2710
edoc-URL	http://edoc.unibas.ch/42800/
Full Text on edoc	No
Digital Object Identifier DOI	10.1093/jeg/lbt020
ISI-Number	WOS:000332037500002
Document type (ISI)	Article

14/05/2024

Research Database / FORSCHUNGSDATENBANK