Agglomerationsvorteile und kommunales Steueraufkommen. - 2., überarbeitete Auflage

Christian Bergholz, Christian Hundt and Torsten Osigus

No 320296, Thünen Working Paper from Johann Heinrich von Thünen-Institut (vTI), Federal Research Institute for Rural Areas, Forestry and Fisheries

Abstract: Using the example of German districts and independent cities (kreisfreie Städte), we find that latter generate higher gross domestic product (GDP) per inhabitant as well as larger tax revenues per inhabitant. Accordingly, independent cities generate a GDP of €50,854 per inhabitant and record tax revenues of €1,739 per inhabitant, while in municipalities belonging to districts the GDP is €32,029 per inhabitant and tax revenues per inhabitant are €1,283. In order to analyze the positive correlation between GDP and tax revenues, we look in particular at the role of (net) agglomeration economies. Furthermore, we argue that agglomeration economies increase local governments´ tax revenues per inhabitant through two distinct channels. First, agglomeration economies lead to rising local value added that again ends up in a greater local tax base and in greater local tax revenues (indirect channel). Second, local governments can directly tax local agglomeration economies by increasing their tax multipliers (direct channel). Looking at total tax revenues, our empirical results suggest that the indirect channel is quantitatively more important than the direct channel. However, the extent to which both channels come into play varies considerably across the examined types of tax revenues. While the direct channel is most important for non-agricultural/non-forestry land property tax, the indirect channel plays a more important role for the three business-related taxes. Property tax for agricultural and forestry land shows a high negative effect, especially in the case of the direct channel. The reason for this is that there are no agglomeration-related rents for agricultural and forestry land that can be taxed. Finally, we can show that the business-related tax revenues (business tax, income tax, value added tax) per inhabitant are systematically lower in Eastern Germany than in Western Germany, which is mainly due to the lower average GDP per inhabitant of Eastern German districts and independent cities.

Keywords: Community/Rural/Urban Development; Financial Economics; Political Economy; Public Economics (search for similar items in EconPapers)
Pages: II, 33
Date: 2022-04-05
New Economics Papers: this item is included in nep-ban and nep-geo
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Persistent link: https://EconPapers.repec.org/RePEc:ags:jhimwp:320296

DOI: 10.22004/ag.econ.320296

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