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Do Agglomeration Forces Strengthen Tax Interactions?

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  • 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)

Abstract

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.

Suggested Citation

  • Sylvie Charlot & Sonia Paty, 2010. "Do Agglomeration Forces Strengthen Tax Interactions?," Urban Studies, Urban Studies Journal Limited, vol. 47(5), pages 1099-1116, May.
    • Handle: RePEc:sae:urbstu:v:47:y:2010:i:5:p:1099-1116
    DOI: 10.1177/0042098009353077
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    Cited by:

    1. Aras Zirgulis, 2014. "Is International Capital Tax Competition Fueled by the Quest for Increased Productivity?," Proceedings of International Academic Conferences 0702435, International Institute of Social and Economic Sciences.
    2. Sonia Paty & Tidiane Ly, 2017. "Local taxation and tax base mobility: Evidence from a business tax reform in France," Post-Print halshs-01679043, HAL.
    3. Sylvie Charlot & Sonia Paty & Virginie Piguet, 2015. "Does Fiscal Cooperation Increase Local Tax Rates in Urban Areas?," Regional Studies, Taylor & Francis Journals, vol. 49(10), pages 1706-1721, October.
    4. Heimberger, Philipp, 2021. "Corporate tax competition: A meta-analysis," European Journal of Political Economy, Elsevier, vol. 69(C).
    5. Sandy Fréret & Denis Maguain, 2017. "The effects of agglomeration on tax competition: evidence from a two-regime spatial panel model on French data," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 24(6), pages 1100-1140, December.
    6. Ly, Tidiane & Paty, Sonia, 2020. "Local taxation and tax base mobility: Evidence from France," Regional Science and Urban Economics, Elsevier, vol. 82(C).
    7. Cassette, Aurélie & Di Porto, Edoardo & Foremny, Dirk, 2012. "Strategic fiscal interaction across borders: Evidence from French and German local governments along the Rhine Valley," Journal of Urban Economics, Elsevier, vol. 72(1), pages 17-30.
    8. Dae Jin Kim & In Kwon Park, 2017. "The local distribution of endowments matters: Modelling tax competition with heterogeneous local residents," Urban Studies, Urban Studies Journal Limited, vol. 54(14), pages 3239-3259, November.
    9. Anita Yadavalli & Jim Landers, 2017. "Tax Increment Financing: A Propensity Score Approach," Economic Development Quarterly, , vol. 31(4), pages 312-325, November.
    10. Michael P. Devereux & Simon Loretz, 2013. "What Do We Know About Corporate Tax Competition?," National Tax Journal, National Tax Association;National Tax Journal, vol. 66(3), pages 745-774, September.
    11. Sanz-Córdoba, Patricia, 2020. "The role of infrastructure investment and factor productivity in international tax competition," Economic Modelling, Elsevier, vol. 85(C), pages 30-38.
    12. Giuseppe Arbia, 2011. "A Lustrum of SEA: Recent Research Trends Following the Creation of the Spatial Econometrics Association (2007--2011)," Spatial Economic Analysis, Taylor & Francis Journals, vol. 6(4), pages 377-395, July.
    13. Blesse, Sebastian & Martin, Thorsten, 2015. "Let's stay in touch - evidence on the role of social learning in local tax interactions," ZEW Discussion Papers 15-081, ZEW - Leibniz Centre for European Economic Research.
    14. Francisco Delgado & Matías Mayor, 2011. "Tax mimicking among local governments: some evidence from Spanish municipalities," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 10(2), pages 149-164, August.
    15. Mohamed Ali Labidi, 2021. "Tunisian industrial policy, location and evolution of the industrial space of the interior regions," Regional Science Policy & Practice, Wiley Blackwell, vol. 13(3), pages 943-956, June.
    16. Tidiane Ly & Sonia Paty, 2018. "Local Taxation and Tax Base Mobility: Evidence from the French business tax reform," Working Papers halshs-01812611, HAL.
    17. Aras Zirgulis, 2014. "Is International Capital Tax Competition Fueled by the Quest for Increased Productivity?," International Journal of Economic Sciences, Prague University of Economics and Business, vol. 2014(4), pages 99-116.
    18. Sebastian Langer, 2019. "Expenditure interactions between municipalities and the role of agglomeration forces: a spatial analysis for North Rhine-Westphalia," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 62(3), pages 497-527, June.

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