2026-04-17T02:43:14Zhttps://recercat.cat/oai/request

oai:recercat.cat:2445/1189112025-11-19T20:44:38Zcom_2072_1057col_2072_478859col_2072_478917

Which communities should be afraid of mobility? The effects of agglomeration economies on the sensitivity of firm location to local taxes Jofre Monseny, Jordi Solé Ollé, Albert Administració local Subvencions Local government Subsidies This paper examines the effects of agglomeration economies (AE) on the sensitivity of firm location to tax differentials. An initial reading of the story suggests that, with AE, when a firm moves into a community attracted by a tax reduction, other firms may decide to move in as well. This suggests that AE increase the sensitivity of firm location to local taxes. However, a second version of the story reads that, if economic activities are highly concentrated in space, AE might offset any tax differential, hence suggesting a reduction in this sensitivity. This paper provides a theoretical model of intraregional firm location with Marshallian AE that is able to generate both hypotheses: AE increase (decrease) the effect of taxes when locations are (are not) of a similar size. We then use Spanish municipal data for the period 1995-2002 to test these hypotheses, analyzing the combined effect of local business taxes and Marshallian AE on the intraregional location of employment. In line with the theory, a municipality with stronger AE experiences lower (higher) tax effects if it is sufficiently dissimilar (similar) to its neighbors in terms of size. 2018-01-08T16:51:58Z 2018-01-08T16:51:58Z 2008 info:eu-repo/semantics/workingPaper Reproducció del document publicat a: http://www.ieb.ub.edu/2012022157/ieb/ultimes-publicacions IEB Working Paper 2008/04 [WP E-IEB08/04] cc-by-nc-nd, (c) Jofre Monseny, 2008 http://creativecommons.org/licenses/by-nc-nd/3.0/es/ info:eu-repo/semantics/openAccess Institut d’Economia de Barcelona IEB (Institut d’Economia de Barcelona) – Working Papers