Agglomeration Economies, Taxable Rents, And Government Capture: Evidence From A Place-Based Policy

Brülhart, Marius and Helen Simpson
Authors registered in the RePEc Author Service: Marius Brülhart

No 10578, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We study how industry-level agglomeration economies affect government policy. Using administrative data on firm subsidies in economically lagging regions of Great Britain, we test two alternative hypotheses. Economic geography models imply that firms at an industry?s core can sustain higher tax burdens or require lower subsidies than firms in more remote locations. Conversely, political economy models predict firms at the industry?s core to be more successful at lobbying government, particularly at the sub-national level, thus obtaining more favourable fiscal treatment. We find that local government agencies structure subsidy offers to favour pre-existing employment in locally agglomerated industries, behaviour more in line with theories of policy capture than with economic geography models.

Keywords: Agglomeration; Policy capture; Regional grants; Taxation (search for similar items in EconPapers)
JEL-codes: H25 H32 R12 (search for similar items in EconPapers)
Date: 2015-05
New Economics Papers: this item is included in nep-geo, nep-pol and nep-ure
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Agglomeration economies, taxable rents and government capture: evidence from a place-based policy (2018)
Working Paper: Agglomeration economies, taxable rents, and government capture: evidence from a place-based policy (2014)
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