An Analysis On Agglomeration And Interregional Tax Competition

This paper analyses agglomeration effects of interregional tax competition in the new economic geography settings. Our theory analysis combines the new economic geography theory and the tax competition theory, puts the agglomeration effect into the governments'tax competition strategy, and gives theory guides to government for tax competition.The positive analysis calculates the index of agglomeration and tax competition of our country concludes that the eastern part of our country gets the agglomeration effect, wins the interregional tax competition on rental and agglomeration's rent. This paper's positive analysis conclusion supports that a region which hosts an agglomeration can win the tax competition and raise tax rate without losing capital, the middle part of our country don't give up interregional tax competition, and attract capital from the eastern positively by lower tax rate and lower labor cost, especially the capital from Labor--intensive industry. The eastern should adjust the industry structure, the middle and western should develop the industry agglomeration to use the externality effect of industry agglomeration.