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The effect of effective tax rate differentials and clustering on investment in Belgium

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  • Tim Goesaert

Abstract

This paper looks at the effect of agglomeration economies on the tax sensitivity of investments in Belgian firms using detailed firm-level data. We find a negative effect of taxation on investment. However, this is dampened by the presence of agglomeration externalities. Our results hint to the importance of local labor market and supplying industries for firm investment decisions and follow the more nuanced view on tax competition of the New Economic Geography models.

Suggested Citation

  • Tim Goesaert, 2012. "The effect of effective tax rate differentials and clustering on investment in Belgium," Working Papers of VIVES - Research Centre for Regional Economics 28, KU Leuven, Faculty of Economics and Business (FEB), VIVES - Research Centre for Regional Economics.
    • Handle: RePEc:ete:vivwps:28
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