Title: Taxes, agglomeration rents and location decisions of firms
Authors: CrabbĂ©, Karen
De Bruyne, Karolien
Issue Date: Oct-2010
Publisher: K.U. Leuven - Faculty of Business and Economics
Series Title: FBE Research Report AFI_1046 pages:1-33
Abstract: 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,
we 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. We show that a higher effective tax rate in a district
weakens the positive impact of the agglomeration rents on location decisions of
Publication status: published
KU Leuven publication type: IR
Appears in Collections:Research Center Accountancy, Leuven
Research Center of International Economics, Leuven
Formerly "Subfaculteit Antwerpen/Handelswetenschappen - TM A"
Faculty of Economics and Business (FEB) - miscellaneous
Department of ECON-CEDON, Campus Brussels
Research Centre for Globalization, Innovation and Competition, Campus Brussels (-)

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