Paper #631

Títol:

Tax incentives and the city

Autors:

Teresa Garcia-Milà i Therese J. McGuire

Data:

Octubre 2001

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.

Paraules clau:

Tax incentives, concentration externalities, agglomeration economies, tax competition, benefit tax

Codis JEL:

H2, H7, R1, R2

Àrea de Recerca:

Macroeconomia i Economia Internacional

Publicat a:

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

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