Firms in clustered industries are prepared to pay higher taxes than those that are not.

To what extent do corporate tax rates determine where firms are located? New research comparing two industries in Switzerland from Marius Brülhart, Mario Jametti and Kurt Schmidheiny finds that the relative benefits to firms that are highly clustered mean that they are less sensitive to higher tax rates. European governments will find it less costly to raise corporate taxes in areas where industries are highly clustered.