Tax incentives and the city

Citació

  • Brooking-Wharton Papers on Urban Affairs, 2002, pp. 95-132

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Descripció

  • Resum

    It is difficult to justify tax incentives within the existing economics literature on tax competition. We develop a model in which communities are interested in attracting firms not only for their own capital but also for the concentration externalities, a form of agglomeration economies, their location bestows on existing firms. We find that it is efficient in this case for communities to offer tax incentives, defined as a tax rate below the benefit tax level, to firms. We present the recent relocation of the Boeing Corporation's headquarters from Seattle to Chicago as a case study.
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