Unravelling heterogeneities in taxable agglomeration rents: a lens through location elasticity

Jesus Lopez-Rodriguez and Brais Pociña-Sanchez

Regional Studies, 2025, vol. 59, issue 1, 2537702

Abstract: The approaches used to assess the existence of taxable agglomeration rents (TARs) impose the fact that all jurisdictions face the same TARs elasticity. This paper reassess the TARs phenomenon in Spain, proposing a modification of the workhorse spatial autoregresive model with fixed effects (SAR-FE) which controls for heterogeneities in the effect of agglomeration on business tax rates using functional urban areas. The estimation of the model using a panel of 7141 municipalities from 2009 to 2021 shows that TARs are only confirmed for a small number of urban municipalities. Madrid emerges as a striking result, and we point out a potential explanation by considering who are its competitors.

Date: 2025
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DOI: 10.1080/00343404.2025.2537702

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