IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/116156.html
   My bibliography  Save this paper

Using Taxes to Attract the Creative Class in the Presence of a Region-Specific Rent

Author

Listed:
  • Batabyal, Amitrajeet
  • Yoo, Seung Jick

Abstract

We analyze interregional competition between two regions A and B that use taxes to attract a representative creative class member (the entrepreneur). This entrepreneur establishes a firm in either region A or B and this action guarantees her profit. However, if the entrepreneur locates in region A then she also obtains a stochastic, location-specific rent that is either high with positive probability or low with positive complementary probability. In this setting, we accomplish three tasks. First, given values of the two tax rates, we determine the payoff to the entrepreneur in the two regions for the two possible values of the location-specific rent in A. Second, we ascertain when the entrepreneur will locate in A for both values of the rent and when she will locate in B. Finally, we compute the tax rate that B will set and then specify a condition which ensures that the entrepreneur locates in B.

Suggested Citation

  • Batabyal, Amitrajeet & Yoo, Seung Jick, 2022. "Using Taxes to Attract the Creative Class in the Presence of a Region-Specific Rent," MPRA Paper 116156, University Library of Munich, Germany, revised 02 Jan 2023.
  • Handle: RePEc:pra:mprapa:116156
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/116156/1/MPRA_paper_116156.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Amitrajeet A. Batabyal & Karima Kourtit & Peter Nijkamp, 2019. "Using local public goods to attract and retain the creative class: A tale of two cities," Regional Science Policy & Practice, Wiley Blackwell, vol. 11(3), pages 571-581, August.
    2. Batabyal, Amitrajeet A. & Nijkamp, Peter, 2016. "Creative capital in production, inefficiency, and inequality: A theoretical analysis," International Review of Economics & Finance, Elsevier, vol. 45(C), pages 553-558.
    3. Kelsey L. Conley & Brian E. Whitacre, 2016. "Does Broadband Matter for Rural Entrepreneurs and Creative Class Employees?," The Review of Regional Studies, Southern Regional Science Association, vol. 46(2), pages 171-190, Summer.
    4. Amitrajeet A. Batabyal & Hamid Beladi, 2021. "Interregional demand for workers and the effects of labour income taxation," Regional Science Policy & Practice, Wiley Blackwell, vol. 13(3), pages 1042-1050, June.
    5. Batabyal, Amitrajeet A. & Yoo, Seung Jick, 2022. "Tax policy and interregional competition for mobile venture capital by the creative class," The North American Journal of Economics and Finance, Elsevier, vol. 61(C).
    6. Thiess Buettner & Eckhard Janeba, 2016. "City competition for the creative class," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 40(4), pages 413-451, November.
    7. Batabyal, Amitrajeet A. & Yoo, Seung Jick, 2018. "Schumpeterian creative class competition, innovation policy, and regional economic growth," International Review of Economics & Finance, Elsevier, vol. 55(C), pages 86-97.
    8. David Audretsch & Maksim Belitski, 2013. "The missing pillar: the creativity theory of knowledge spillover entrepreneurship," Small Business Economics, Springer, vol. 41(4), pages 819-836, December.
    9. Amitrajeet A. Batabyal & Peter Nijkamp, 2022. "Interregional Competition for Mobile Creative Capital with and Without Physical Capital Mobility," International Regional Science Review, , vol. 45(1), pages 58-73, January.
    10. Amitrajeet A. Batabyal, 2021. "How Many Members of the Creative Class Should a City Seek to Attract?," The Review of Regional Studies, Southern Regional Science Association, vol. 51(2), pages 161-169.
    11. Brueckner, Jan K. & Saavedra, Luz A., 2001. "Do Local Governments Engage in Strategic Property-Tax Competition?," National Tax Journal, National Tax Association;National Tax Journal, vol. 54(2), pages 203-230, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Batabyal, Amitrajeet & Beladi, Hamid, 2022. "Sustained Economic Growth and Physical Capital Taxation in a Creative Region," MPRA Paper 113899, University Library of Munich, Germany, revised 17 Jul 2022.
    2. Amitrajeet A. Batabyal & Hamid Beladi, 2022. "The Response of Creative Class Members to Regions Vying to Attract Them With Subsidies," International Regional Science Review, , vol. 45(5), pages 581-600, September.
    3. Batabyal, Amitrajeet A. & Jick Yoo, Seung, 2020. "Using utilitarian and Rawlsian policies to attract the creative class: A tale of two cities," International Review of Economics & Finance, Elsevier, vol. 69(C), pages 295-300.
    4. Amitrajeet A. BATABYAL & Seung Jick YOO, 2019. "A Stochastic Model Of Competition Between Two Cities For Members Of The Creative Class," Regional Science Inquiry, Hellenic Association of Regional Scientists, vol. 0(3), pages 37-42, December.
    5. Batabyal, Amitrajeet & Beladi, Hamid, 2021. "On the Existence of an Equilibrium in Models of Local Public Good Use by Cities to Attract the Creative Class," MPRA Paper 105196, University Library of Munich, Germany, revised 07 Jan 2021.
    6. Wentao Yu & Xiaolan Tan, 2022. "The creative class in China: Heterogeneity and its regional determinants," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(8), pages 3466-3478, December.
    7. Batabyal, Amitrajeet, 2020. "Monopoly vs. Individual Welfare When a Local Public Good is Used to Attract the Creative Class," MPRA Paper 101465, University Library of Munich, Germany, revised 09 Jun 2020.
    8. Amitrajeet A. Batabyal, 2021. "How Many Members of the Creative Class Should a City Seek to Attract?," The Review of Regional Studies, Southern Regional Science Association, vol. 51(2), pages 161-169.
    9. Amitrajeet A. Batabyal & Peter Nijkamp, 2022. "Interregional Competition for Mobile Creative Capital with and Without Physical Capital Mobility," International Regional Science Review, , vol. 45(1), pages 58-73, January.
    10. Batabyal, Amitrajeet & Yoo, Seung Jick, 2019. "Using a Local Public Good to Attract Representative Creative Class Members: The Inefficient Equilibrium Case," MPRA Paper 97841, University Library of Munich, Germany, revised 11 Dec 2019.
    11. 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.
    12. Zodrow, George R, 2003. "Tax Competition and Tax Coordination in the European Union," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 10(6), pages 651-671, November.
    13. Asmae AQZZOUZ & Michel DIMOU, 2022. "Tax mimicking in French counties," Region et Developpement, Region et Developpement, LEAD, Universite du Sud - Toulon Var, vol. 55, pages 113-132.
    14. Matthieu Leprince & Sonia Paty & Emmanuelle Reulier, 2005. "Choix d'imposition et interactions spatiales entre collectivités locales. Un test sur les départements français," Recherches économiques de Louvain, De Boeck Université, vol. 71(1), pages 67-93.
    15. Galinato, Gregmar I. & Chouinard, Hayley H., 2018. "Strategic interaction and institutional quality determinants of environmental regulations," Resource and Energy Economics, Elsevier, vol. 53(C), pages 114-132.
    16. Karen Crabbé, 2013. "Are Your Firm´s Taxes Set in Warsaw? Spatial Tax Competition in Europe," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 69(3), pages 317-337, September.
    17. Pete Maniloff & Dale T. Manning, 2015. "Division of Nonrenewable Resource Rents: A Model of Asymmetric Nash Competition with State Control of Heterogeneous Resources," Working Papers 2015-08, Colorado School of Mines, Division of Economics and Business.
    18. George Crowley & Russell Sobel, 2011. "Does fiscal decentralization constrain Leviathan? New evidence from local property tax competition," Public Choice, Springer, vol. 149(1), pages 5-30, October.
    19. Jian Chen & David H. Downs, 2013. "Property Tax and Tenure Choice: Implications for China," International Real Estate Review, Global Social Science Institute, vol. 16(3), pages 323-343.
    20. Redoano, Michela, 2012. "Fiscal Interactions Among European Countries: Does the EU Matter?," CAGE Online Working Paper Series 102, Competitive Advantage in the Global Economy (CAGE).

    More about this item

    Keywords

    Creative Class; Entrepreneur; Interregional Competition; Region-Specific Rent; Tax;
    All these keywords.

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:116156. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.