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Agglomeration and Tax Competition

Rainald Borck () and Michael P. Pflüger ()
Additional contact information
Michael P. Pflüger: University of Würzburg

No 1033, IZA Discussion Papers from Institute of Labor Economics (IZA)

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 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: 33 pages
Date: 2004-02
New Economics Papers: this item is included in nep-dev, nep-geo, nep-pbe and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8) Track citations by RSS feed

Published in: European Economic Review, 2006, 50 (3), 647-668

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Journal Article: Agglomeration and tax competition (2006) Downloads
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