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Agglomeration and Tax Competition

Rainald Borck () and Michael Pflüger

No 408, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

Abstract: Tax competition for a mobile factor is different in "new economic geography settings" compared to standard tax competition models. The agglomeration rent which accrues to the mobile factor in the core region can be taxed. Moreover, a tax differential between the core and the periphery can be maintained. The present paper reexamines this issue in a setting which, in addition to the core-periphery equilibria, exhibits stable equilibria with partial agglomeration. We show that a tax differential may arise as an equilibrium of the tax game even when there is only partial agglomeration and the mobile factor does not derive an agglomeration rent.

Keywords: Economic geography; Agglomeration; Tax competition (search for similar items in EconPapers)
JEL-codes: F15 F22 H73 R12 (search for similar items in EconPapers)
Pages: 30 p.
Date: 2004
New Economics Papers: this item is included in nep-ure
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Journal Article: Agglomeration and tax competition (2006) Downloads
Working Paper: Agglomeration and Tax Competition (2004) Downloads
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