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City Business Taxes and Retail Firm Relocation Decisions

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  • Charles Swenson

Abstract

There is very little literature on the impact of city taxes on firm relocation decisions. Using an ordered probit econometric model of selection, a national sample of U.S. retail establishments, and data on the existence of city business taxes for the largest 800 cities, I find that establishments are less likely to move to cities with a city business tax, and are more likely to move from cities having such a tax. Specifically, after controlling for other factors, I find that establishments are 30.4 percent less likely to move to a city having a city business tax, and are 22.5 percent more likely to move out of a city having such a tax. The results are consistent across econometric models. The paper contributes to the general literature on firm relocations, and to the literature on the impacts of local taxes. Future research on the impact of city taxes on the relocation decisions of other types of firms is called for.

Suggested Citation

  • Charles Swenson, 2023. "City Business Taxes and Retail Firm Relocation Decisions," Applied Economics and Finance, Redfame publishing, vol. 10(1), pages 1-19, February.
    • Handle: RePEc:rfa:aefjnl:v:10:y:2023:i:1:p:19
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    References listed on IDEAS

    as
    1. Samira Oukarfi & Maurice Baslé, 2009. "Public-sector financial incentives for business relocation and effectiveness measures based on company profile and geographic zone," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 43(2), pages 509-526, June.
    2. repec:dgr:rugsom:02d31 is not listed on IDEAS
    3. Pellenbarg, P.H. & Wissen, L.J.G. van & Dijk, J. van, 2002. "Firm relocation: state of the art and research prospects," Research Report 02D31, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
    4. Richard F. Dye & Therese J. McGuire & David F. Merriman, 2001. "The Impact of Property Taxes and Property Tax Classification on Business Activity in the Chicago Metropolitan Area," Journal of Regional Science, Wiley Blackwell, vol. 41(4), pages 757-777, November.
    5. Arturs Kalnins & Wilbur Chung, 2004. "Resource‐seeking agglomeration: a study of market entry in the lodging industry," Strategic Management Journal, Wiley Blackwell, vol. 25(7), pages 689-699, July.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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