Taxes, agglomeration rents and location decision of firms

Karen Crabbé and Karolien De Bruyne ()

Working Papers of VIVES - Research Centre for Regional Economics from KU Leuven, Faculty of Economics and Business (FEB), VIVES - Research Centre for Regional Economics

Abstract: The goal of this paper is to analyse the impact of interactions between tax rates and agglomeration rents on location decisions of firms within Belgium. In the theoretical literature it is argued that both location determinants may weaken each other’s impact. Using the number of new firms at the sector level for 43 Belgian districts, we show that local effective tax rates either have no or a negative impact on location decisions. Moreover, both types of agglomeration rents in a district are important for location decisions. The presence of firms in a district attracts new firms, while the presence of firms in the same sector deters firm entry due to competition. However, the interaction effect between taxes and agglomeration rents on firm entry is significant. We show that a higher effective tax rate in a district weakens the positive impact of the agglomeration rents on location decisions of firms.

Date: 2011
New Economics Papers: this item is included in nep-acc, nep-ent, nep-geo, nep-pbe and nep-ure
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https://lirias.kuleuven.be/bitstream/123456789/547 ... _crabbe_debruyne.pdf

Related works:
Journal Article: Taxes, Agglomeration Rents and Location Decisions of Firms (2013)
Working Paper: Taxes, agglomeration rents and location decision of firms (2010)
Working Paper: Taxes, Agglomeration Rents and Location Decisions of Firms (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:ete:vivwps:15

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