VIVES: Centre for Regional Policy
Faculty of Business and Economics
[IN THE SPOTLIGHTS] VIVES Discussion Paper 15: Taxes, agglomeration rents and location decisions of firms
The goal of this paper is to analyse the impact of interactions between tax rates and agglomeration rents on location decisions of firms within Belgium. In the theoretical literature it is argued that both location determinants may weaken each other’s impact. Using the number of new firms at the sector level for 43 Belgian districts, the authors show that local effective tax rates either have no or a negative impact on location decisions. Moreover, both types of agglomeration rents in a district are important for location decisions. The presence of firms in a district attracts new firms, while the presence of firms in the same sector deters firm entry due to competition. However, the interaction effect between taxes and agglomeration rents on firm entry is significant. It is shown that a higher effective tax rate in a district weakens the positive impact of the agglomeration rents on location decisions of firms.
RECENT PUBLICATIONS
VIVES Discussion Papers: no. 15Taxes, agglomeration Rents and Location Decisions of Firms (Karen Crabbe en Karolien Debruyne) |
VIVES Discussion Papers: no. 14Does firm agglomeration drive product innovation and renewal? (Filip De Beule en Ilke Van Beveren) |
VIVES Discussion Papers: no. 13The feasibility to regionalise corporate income taxation (Axel Haelterman) |
VIVES Discussion Papers: no. 12Staying Home of Moving Away? The effect of restructuring on employment in multinational headquarters and their affiliates. (Filip Abraham, Tim Goesaert & Joep Konings) |
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