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The Importance of Local Corporate Taxes in Business Location Decisions: Evidence From French Micro Data

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  • Roland Rathelot
  • Patrick Sillard

Abstract

Determinants of businesses locations are known to be multiple. Locations of partners and competitors are crucial, as well as the territory's local characteristics. To consider the importance of local taxes we build a Poisson model to explain the number of business creations observed in a given municipality. First results suggest that there are unobserved factors driving firm creation that are positively correlated with the level of local taxes. To deal with this potential source of endogeneity, we present an approach close to Regression Discontinuity Design. We find that, everything else being equal, higher local taxes actually tend to deter firms from setting up in a given zone but the effect is weak. Copyright � 2008 The Author(s).

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Bibliographic Info

Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 118 (2008)
Issue (Month): 527 (03)
Pages: 499-514

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Handle: RePEc:ecj:econjl:v:118:y:2008:i:527:p:499-514

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Cited by:
  1. Federico Revelli, 2012. "Business taxation and economic performance in hierarchical government structures," Working Papers 2012/12, Institut d'Economia de Barcelona (IEB).
  2. Peter Egger & Doina Radulescu & Nora Strecker, 2013. "Effective labor taxation and the international location of headquarters," International Tax and Public Finance, Springer, vol. 20(4), pages 631-652, August.
  3. Bacher, Hans Ulrich & Brülhart, Marius, 2010. "Progressive Taxes and Firm Births," CEPR Discussion Papers 7830, C.E.P.R. Discussion Papers.
  4. Adrien Lorenceau, 2009. "L'impact d'exonérations fiscales sur la création d'établissements et l'emploi en France rurale : une approche par discontinuité de la régression," PSE Working Papers halshs-00575100, HAL.
  5. Kaitlyn Harger & Amanda Ross, 2014. "Do Capital Tax Incentives Attract New Businesses? Evidence across Industries from the New Markets Tax Credit," Working Papers 14-14, Department of Economics, West Virginia University.
  6. Kolympiris, Christos & Kalaitzandonakes, Nicholas & Miller, Douglas, 2014. "Public funds and local biotechnology firm creation," Research Policy, Elsevier, vol. 43(1), pages 121-137.
  7. Thierry MAYER & Florian MAYNERIS & Loriane PY, 2012. "The Impact of Urban Enterprise Zones on Establishments' Location Decisions: Evidence from French ZFUs," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2012019, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  8. P. Givord & S. Quantin & C. Trevien, 2012. "A Long-Term Evaluation of the First Generation of the French Urban Enterprise Zones," Documents de Travail de la DESE - Working Papers of the DESE g2012-01, Institut National de la Statistique et des Etudes Economiques, DESE.
  9. Manuel Acosta & Daniel Coronado & Esther Flores, 2011. "University spillovers and new business location in high-technology sectors: Spanish evidence," Small Business Economics, Springer, vol. 36(3), pages 365-376, April.
  10. Raphael Parchet, 2012. "Are Local Tax Rates Strategic Complements or Substitutes?," ERSA conference papers ersa12p313, European Regional Science Association.
  11. repec:hal:wpaper:halshs-00575100 is not listed on IDEAS
  12. Eugster, Beatrix & Parchet, Raphaël, 2013. "Culture and Taxes: Towards Identifying Tax Competition," Economics Working Paper Series 1339, University of St. Gallen, School of Economics and Political Science.

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