Tax Differentials and Agglomeration Economies in Intraregional Firm Location

XREAP Working Paper No. 2007-5

34 Pages Posted: 25 May 2011

See all articles by Jordi Jofre-Monseny

Jordi Jofre-Monseny

University of Barcelona - Department of Political Economics

Albert Sole-Olle

University of Barcelona; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: June 1, 2007

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.

Keywords: Local taxes, agglomeration economies, firm location

JEL Classification: R3, H32

Suggested Citation

Jofre-Monseny, Jordi and Sole-Olle, Albert, Tax Differentials and Agglomeration Economies in Intraregional Firm Location (June 1, 2007). XREAP Working Paper No. 2007-5. Available at SSRN: https://ssrn.com/abstract=1850424 or http://dx.doi.org/10.2139/ssrn.1850424

Jordi Jofre-Monseny (Contact Author)

University of Barcelona - Department of Political Economics ( email )

Av. Diagonal, 690
Barcelona, 08034
Spain

Albert Sole-Olle

University of Barcelona ( email )

Gran Via de les Corts Catalanes, 585
Barcelona, 08007
Spain

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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