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Tax Differentials and Agglomeration Economies in Intraregional Firm LocationJordi Jofre-MonsenyUniversity of Barcelona - Department of Political Economics Albert Sole-OlleUniversity of Barcelona; CESifo (Center for Economic Studies and Ifo Institute for Economic Research) June 1, 2007 XREAP Working Paper No. 2007-5 Abstract: This paper analyses empirically how differences in local taxes affect the intraregional location of new manufacturing plants. These effects are examined within the random profit maximization framework while accounting for the presence of different types of agglomeration economies (localization/ urbanization/ Jacobs’ economies) at the municipal level. We look at the location decision of more than 10,000 establishments locating between 1996 and 2003 across more than 400 municipalities in Catalonia, a Spanish region. It is necessary to restrict the choice set to the local labor market and, above all, to control for agglomeration economies so as to identify the effects of taxes on the location of new establishments.
Number of Pages in PDF File: 34 Keywords: Local taxes, agglomeration economies, firm location JEL Classification: R3, H32 working papers seriesDate posted: May 25, 2011Suggested CitationContact Information
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