Agglomeration, Tax Differentials, and the Mobility of Professional Athletes
Public Finance Review, 2016 Forthcoming
30 Pages Posted: 1 Dec 2015
There are 2 versions of this paper
Agglomeration, Tax Differentials, and the Mobility of Professional Athletes
Date Written: November 29, 2015
Abstract
Interstate mobility may limit states’ ability to choose their desired tax policies. The forces of agglomeration, however, may allow states more leeway in setting tax rates. Moreover, mobility and agglomeration effects are not uniform for all individuals within a state, and may vary significantly across different groups. We explore this heterogeneity by examining the residential location decisions of professional racecar drivers and golfers, which have similar industry characteristics but different levels of agglomeration. Consistent with our theory, we show that tax preferences are a powerful determinant of golfer residential patterns, while agglomeration mitigates much of this effect among racecar drivers. These findings highlight the need to better understand how competition and agglomeration interact when formulating tax policy.
Keywords: Agglomeration, Tax Differentials, Mobility
JEL Classification: H21, H30, H73
Suggested Citation: Suggested Citation