Do Governments Tax Agglomeration Rents?

Using 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.agglomeration rents, corporate taxation, regional differentiation

The winner gives it all: Unions, tax competition and offshoring

This paper analyzes competition for capital between welfare-maximizing gov- ernments in a framework with agglomeration tendencies and asymmetric union- ization. We find that a unionized country's government finds it optimal to use tax policy to induce industry to relocate towards a location with a competitive labor market instead of realizing the benefits from higher wage income while exporting part of the wage burden to foreign consumers. Via the tax regime effect, which favors the factor capital, and the efficiency effect, consumers and producers alike benefit from off-shoring industry towards a low-cost country. Our result qualifies first intuition that defending high wage industries is beneficial to a country as part of the associated cost is shifted to foreign consumers.tax competition, trade unions, agglomeration

Does Trade Integration Contribute to Peace?

We investigate the effect of trade integration on interstate military conflict. Our empirical analysis, based on a large panel data set of 243,225 country-pair observations from 1950 to 2000, confirms that an increase in bilateral trade interdependence significantly promotes peace. It also suggests that the peace-promotion effect of bilateral trade integration is significantly higher for contiguous countries that are likely to experience more conflict. More importantly, we find that not only bilateral trade but global trade openness also significantly promotes peace. It shows, however, that an increase in global trade openness reduces the probability of interstate conflict more for countries far apart from each other than it does for countries sharing borders. The results also show that military conflict between countries significantly reduces not only bilateral trade interdependence but also global trade integration. The main finding of the peace-promotion effect of bilateral and global trade integration holds robust when controlling for the natural and geopolitical characteristics of dyads of states that may influence the probability of military conflict and for the simultaneous determination of trade and peace.Trade, Globalization, Military conflict, Peace, War

Decreased Interleukin-4 Release from the Neurons of the Locus Coeruleus in Response to Immobilization Stress

It has been demonstrated that immobilization (IMO) stress affects neuroimmune systems followed by alterations of physiology and behavior. Interleukin-4 (IL-4), an anti-inflammatory cytokine, is known to regulate inflammation caused by immune challenge but the effect of IMO on modulation of IL-4 expression in the brain has not been assessed yet. Here, it was demonstrated that IL-4 was produced by noradrenergic neurons in the locus coeruleus (LC) of the brain and release of IL-4 was reduced in response to IMO. It was observed that IMO groups were more anxious than nontreated groups. Acute IMO (2 h/day, once) stimulated secretion of plasma corticosterone and tyrosine hydroxylase (TH) in the LC whereas these increments were diminished in exposure to chronic stress (2 h/day, 21 consecutive days). Glucocorticoid receptor (GR), TH, and IL-4-expressing cells were localized in identical neurons of the LC, indicating that hypothalamic-pituitary-adrenal- (HPA-) axis and sympathetic-adrenal-medullary- (SAM-) axis might be involved in IL-4 secretion in the stress response. Accordingly, it was concluded that stress-induced decline of IL-4 concentration from LC neurons may be related to anxiety-like behavior and an inverse relationship exists between IL-4 secretion and HPA/SAM-axes activation