Koh, Hyun-JuRiedel, Nadine2017-10-162017-10-162010https://hdl.handle.net/2445/116665Using the German local business tax as a testing ground, we empirically investigate the impact of firm agglomeration on municipal tax setting behavior. The analysis exploits a rich data source on the population of German firms to construct detailed measures for the communities' agglomeration characteristics. The findings indicate that urbanization and localization economies exert a positive impact on the jurisdictional tax rate choice which confirms predictions of the theoretical New Economic Geography (NEG) literature. Further analysis suggests a qualification of the NEG argument by showing that a municipality's potential to tax agglomeration rents depends on its firm and industry agglomeration relative to neighboring communities. To account for potential endogeneity problems, our analysis exploits long-lagged population and infrastructure variables as instruments for the agglomeration measures.48 p.application/pdfengcc-by-nc-nd, (c) Koh et al., 2010http://creativecommons.org/licenses/by-nc-nd/3.0/es/Concentració industrialImpostos sobre societatsEconomia regionalIndustrial concentrationCorporate taxesRegional economicsinfo:eu-repo/semantics/workingPaperinfo:eu-repo/semantics/openAccess