The Agglomeration Type And Interregional Tax Competition

The paper analyses industrial agglomeration effects of interregional taxcompetition and describes the theory of industrial agglomeration and tax competition.Then the paper introduces industrial agglomeration into the standard tax competitionmodel to analyze and provides guidance for government tax competition strategy.With the empirical analysis, the paper constructs different forms of industrialagglomeration by using two dimensions of specialized agglomeration and totalconcentration. Then we test the relation of industrial agglomeration and tax competitionin four regions, find that the total concentration, specialized agglomeration, industryagglomeration externalities affect tax competition differently. The different forms ofindustrial agglomeration have different tax competition results. The result supposes thattotal concentration has positive effect on tax competition, and high total concentrationwill win a high tax burden. The specialized agglomeration in our country is low-skilled,and cannot afford a high tax burden. It shows low specialization characteristics for theregion. Finally, the paper proposes solutions by several aspects, including the reform ofthe tax system, the development of industrial agglomeration, and to promote regionalspecialization process for the different regions.