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Fees and Firms: An Empirical Examination of the Relationship Between Development Impact Fees and Firms

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  • Adam Jones

Abstract

Over the past few decades, many counties have adopted development impact fees as an alternative to traditional tax funding for infrastructure required to support new development. In a theoretical model of firm entry using fixed costs and increasing returns to scale, additional fees, modeled as an increase in fixed costs, reduces the number of entrants and increases a firm’s size. Using county level data on homogenous, small draw area firms in Florida, the research presented in this paper suggests that fees reduce the number of firms per capita in a jurisdiction. While population and market size are the main drivers of firms’ location decisions, the results presented in this paper suggest that fees may have a negative effect on firm location decisions at the margin. Policy makers concerned about employment and commercial tax base should give pause before implementing a fee system. Copyright International Atlantic Economic Society 2015

Suggested Citation

  • Adam Jones, 2015. "Fees and Firms: An Empirical Examination of the Relationship Between Development Impact Fees and Firms," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 43(2), pages 261-269, June.
    • Handle: RePEc:kap:atlecj:v:43:y:2015:i:2:p:261-269
    DOI: 10.1007/s11293-015-9453-7
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    References listed on IDEAS

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    1. Burge, Gregory & Ihlanfeldt, Keith, 2006. "Impact fees and single-family home construction," Journal of Urban Economics, Elsevier, vol. 60(2), pages 284-306, September.
    2. Burge, Gregory & Ihlanfeldt, Keith, 2009. "Development impact fees and employment," Regional Science and Urban Economics, Elsevier, vol. 39(1), pages 54-62, January.
    3. Brueckner, Jan K., 1997. "Infrastructure financing and urban development:: The economics of impact fees," Journal of Public Economics, Elsevier, vol. 66(3), pages 383-407, December.
    4. Yinger, John, 1998. "The Incidence of Development Fees and Special Assessments," National Tax Journal, National Tax Association, vol. 51(n. 1), pages 23-41, March.
    5. Ihlanfeldt, Keith R. & Shaughnessy, Timothy M., 2004. "An empirical investigation of the effects of impact fees on housing and land markets," Regional Science and Urban Economics, Elsevier, vol. 34(6), pages 639-661, November.
    6. Bresnahan, Timothy F & Reiss, Peter C, 1991. "Entry and Competition in Concentrated Markets," Journal of Political Economy, University of Chicago Press, vol. 99(5), pages 977-1009, October.
    7. Yinger, John, 1998. "The Incidence of Development Fees and Special Assessments," National Tax Journal, National Tax Association;National Tax Journal, vol. 51(1), pages 23-41, March.
    8. Adam T. Jones & Arthur Snow, 2015. "A Normative Analysis of Impact Fees for Suburban Commercial Development," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 71(2), pages 141-152, June.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Impact fees; Firm size; Small business; Regional economics; E62; R10;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General

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