IDEAS home Printed from
   My bibliography  Save this paper

Small scale economic differentiation – A multi-level analysis with indirect closure


  • Anne Margarian



We want to isolate systematically differing small-scale agglomeration-patterns, which indicate different types of competition between localities. We apply a technique of indirect closure based on the differing observed relation between local business tax-rate and tax-revenue and use a mixed multi-level model in order to cope with local dependencies on different scales. Thereby it is shown that small-scale agglomeration effects, i.e. differing development potentials of similar municipalities, are at least partially determined by settlement characteristics, geographical relative position and industry structure. Since these influences interact in various ways the observed patterns are very complex. It is due to small-scale "agglomeration-effects", defined here as a positive observed relation between tax-rate and tax-revenue, that municipalities of the same type may nevertheless have different potentials in economic development. On the other hand, a high mobility of firms in a dynamic environment strengthens the competition-effect as indicated by a negative relation between tax-rate and tax-revenue. Under such circumstances municipalities will strive for convergence. In empirical studies comparing regional developments on various geographical scales these heterogeneous relations will have to be taken into account in order to reach generalisable conclusions. we also conclude that regional economic policy cannot apply identical concepts independently of the wider economic environment. Instead it has to react to the differing endogenous potentials of localities for economic development.

Suggested Citation

  • Anne Margarian, 2011. "Small scale economic differentiation – A multi-level analysis with indirect closure," ERSA conference papers ersa11p1340, European Regional Science Association.
  • Handle: RePEc:wiw:wiwrsa:ersa11p1340

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Buettner, Thiess, 2006. "The incentive effect of fiscal equalization transfers on tax policy," Journal of Public Economics, Elsevier, vol. 90(3), pages 477-497, February.
    2. Judith D. Singer, 1998. "Using SAS PROC MIXED to Fit Multilevel Models, Hierarchical Models, and Individual Growth Models," Journal of Educational and Behavioral Statistics, , vol. 23(4), pages 323-355, December.
    Full references (including those not matched with items on IDEAS)

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    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:wiw:wiwrsa:ersa11p1340. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Gunther Maier). General contact details of provider: .

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.