The project analyses local business-settlement policies. It raises the question of how policy instruments should be designed to attract businesses. Existing studies examine decisions at the level of national governments. However, a strategic business-settlement policy is also pursued at a sub-national level. Expenditures such as infrastructure spending and revenue decisions such as business-related taxes influence the site choice of enterprises.
The study examines the 12,629 municipalities in Germany that decide on the relevant spending and revenue categories (for example, local business taxes). The disaggregated approach makes possible an explicit consideration of agglomeration advantages, with which the municipalities are variously endowed, and which together with the fiscal incentives also determine site choice. The construction of a data set and the theory-based empirical analysis of the data will provide a better understanding of how settlement policies work and will enable an empirically validated assessment of municipal settlement policies.
The methods applied will draw on micro-econometric techniques such as the ones for grouped data or fractions and spatial econometric methods. The latter will allow us to study interdependent policy instrument choices and cross-municipality spillover effects of taxation and public expenditure.
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