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Do Agglomeration Forces Strengthen Tax Interactions?

  • Sylvie Charlot

    (INRA Dijon, CESAER UMR 1041, 26 Bld Dr Petitjean, BP 87999, Dijon cedex, 21079, France, charlot@enesad.inra.fr)

  • Sonia Paty

    (CREM and EQUIPPE, University of Caen, 17 rue Claude Bloch, BP 5186, F-14032 Caen Cedex, France, sonia.paty@unicaen.fr)

The main purpose of this paper is to assess the existence of tax interdependencies among French local tax setting by taking into account the agglomeration forces. A model of tax setting for the local business tax is estimated using spatial econometrics techniques for 2002. First, it is shown that the mimicking behaviour between jurisdictions is not more intense in denser areas—in population or economic activity terms—suggesting that tax competition is not stronger as agglomeration increases. Secondly, a positive relationship is observed between tax rate and capital stock only for urban jurisdictions, suggesting a ‘taxable agglomeration rent’, as highlighted by new economic geography models.

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Article provided by Urban Studies Journal Limited in its journal Urban Studies.

Volume (Year): 47 (2010)
Issue (Month): 5 (May)
Pages: 1099-1116

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Handle: RePEc:sae:urbstu:v:47:y:2010:i:5:p:1099-1116
Contact details of provider: Web page: http://www.gla.ac.uk/departments/urbanstudiesjournal

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