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Agglomeration, Tax Differentials, and the Mobility of Professional Athletes

Author

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  • Grant A. Driessen
  • Steven M. Sheffrin

Abstract

Interstate mobility may limit states’ ability to choose their desired tax policies. The forces of agglomeration, however, may allow states more leeway in setting tax rates. Moreover, mobility and agglomeration effects are not uniform for all individuals within a state and may vary significantly across different groups. We explore this heterogeneity by examining the residential location decisions of professional racecar drivers and golfers, which have similar industry characteristics but different levels of agglomeration. Consistent with our theory, we show that tax preferences are a powerful determinant of golfer residential patterns, while agglomeration mitigates much of this effect among racecar drivers. These findings highlight the need to better understand how competition and agglomeration interact when formulating tax policy.

Suggested Citation

  • Grant A. Driessen & Steven M. Sheffrin, 2017. "Agglomeration, Tax Differentials, and the Mobility of Professional Athletes," Public Finance Review, , vol. 45(2), pages 283-302, March.
    • Handle: RePEc:sae:pubfin:v:45:y:2017:i:2:p:283-302
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    Citations

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    Cited by:

    1. Anna Bykova & Dennis Coates, 2022. "Professional team sporting success: do economic and personal freedom provide competitive advantages?," Economics of Governance, Springer, vol. 23(3), pages 323-358, December.
    2. Erik Hembre, 2022. "State income taxes and team performance," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 29(3), pages 704-725, June.
    3. Brad R. Humphreys & Amir B. Ferreira Neto, 2020. "Localization Economies and Firm Productivity: Evidence from Football Teams in Sao Paulo, Brazil," Working Papers 20-09, Department of Economics, West Virginia University.

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