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Assessing the Effects of Local Taxation Using Microgeographic Data

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Author Info
Gilles Duranton
Laurent Gobillon
Henry Overman

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Abstract

We study the impact of local taxation on the location and growth of firms. Our empirical methodology pairs establishments across jurisdictional boundaries to estimate the impact of taxation. Our approach improves on existing work as it corrects for unobserved establishment heterogeneity, for unobservedtime-varying site specific effects, and for the endogeneity of local taxation. Applied to data for English manufacturing establishments we find that local taxation has a negative impact onemployment growth, but no effect on entry.

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Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0748.

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Date of creation: Aug 2006
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Handle: RePEc:cep:cepdps:dp0748

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Related research
Keywords: Local taxation; spatial differencing; borders;

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Find related papers by JEL classification:
H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
R38 - Urban, Rural, and Regional Economics - - Production Analysis and Firm Location - - - Government Policies; Regulatory Policies

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Gibbons, Steve & Machin, Stephen, 2003. "Valuing English primary schools," Journal of Urban Economics, Elsevier, vol. 53(2), pages 197-219, March. [Downloadable!] (restricted)
  2. Paulo Guimaraes & Octavio Figueiredo & Douglas Woodward, 2000. "A tractable approach to the firm location decision problem," Working Papers 2, Núcleo de Investigação em Microeconomia Aplicada (NIMA), Universidade do Minho. [Downloadable!]
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  3. Berman, Eli & Bui, Linda T. M., 2001. "Environmental regulation and labor demand: evidence from the South Coast Air Basin," Journal of Public Economics, Elsevier, vol. 79(2), pages 265-295, February. [Downloadable!] (restricted)
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  4. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2004. "How Much Should We Trust Differences-in-Differences Estimates?," The Quarterly Journal of Economics, MIT Press, vol. 119(1), pages 249-275, February. [Downloadable!] (restricted)
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  5. Sandra E. Black, 1997. "Do better schools matter? Parental valuation of elementary education," Research Paper 9729, Federal Reserve Bank of New York. [Downloadable!]
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  6. Steve Bond & Kevin Denny & John Hall & William McClusky, 1996. "Who pays business rates?," Fiscal Studies, Institute for Fiscal Studies, vol. 17(1), pages 19-35, February. [Downloadable!]
  7. Duranton, Gilles & Overman, Henry G., 2002. "Testing for Localization Using Micro-Geographic Data," CEPR Discussion Papers 3379, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  8. Bob Thompson & Sotiris Tsolacos, 2001. "Industrial Land Values — A Guide to Future Markets?," Journal of Real Estate Research, American Real Estate Society, vol. 21(1/2), pages 55-76. [Downloadable!]
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  10. Paulo Guimaraes & Octávio Figueiredo & Douglas Woodward, 2004. "Industrial Location Modeling: Extending the Random Utility Framework," Journal of Regional Science, Blackwell Publishing, vol. 44(1), pages 1-20. [Downloadable!] (restricted)
  11. Epple, Dennis & Nechyba, Thomas, 2004. "Fiscal decentralization," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 55, pages 2423-2480 Elsevier. [Downloadable!] (restricted)
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  13. Thomas J. Holmes, 1998. "The Effect of State Policies on the Location of Manufacturing: Evidence from State Borders," Journal of Political Economy, University of Chicago Press, vol. 106(4), pages 667-705, August. [Downloadable!] (restricted)
  14. Kahn, Matthew E., 2004. "Domestic pollution havens: evidence from cancer deaths in border counties," Journal of Urban Economics, Elsevier, vol. 56(1), pages 51-69, July. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Marius Brülhart & Mario Jametti & Kurt Schmidheiny, 2007. "Do Agglomeration Economies Reduce the Sensitivity of Firm Location to Tax Differentials?," Economics Working Papers 1062, Department of Economics and Business, Universitat Pompeu Fabra. [Downloadable!]
    Other versions:
  2. Raffaella Sadun, 2008. "Does Planning Regulation Protect Independent Retailers?," CEP Discussion Papers dp0888, Centre for Economic Performance, LSE. [Downloadable!]
  3. Redding, Stephen J, 2009. "Economic Geography: a Review of the Theoretical and Empirical Literature," CEPR Discussion Papers 7126, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  4. Jordi Jofre-Monseny & Albert Solé-Ollé, 2008. "Which Communities should be afraid of Mobility? The Effects of Agglomeration Economies on the Sensitivity of Firm Location to Local Taxes," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  5. Jordi Jofre Monseny & Alberto Sole Olle, 2007. "Tax Differentials and Agglomeration Economies in Intraregional Firm Location," Working Papers in Economics 180, Universitat de Barcelona. Espai de Recerca en Economia. [Downloadable!]
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