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The impact of local taxes on plants location decision

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  • R. RATHELOT

    (Insee)

  • P. SILLARD

    (Insee)

Abstract

Determinants of plant locations are known to be multiple. Locations of partners and competitors are crucial, as well as the territory's local characteristics. Some local characteristics can be natural. Others, like local taxes, reflect local agents' decisions. To what extent are local taxes taken into consideration during the plant location process? We build a Poisson model to explain the number of firm creations observed in a given municipality in a given year. Correlations and first results tend to show that there exists some unobserved attractivity factors correlated with the level of local taxes. To deal with endogeneity, we present an approach close to the Regression Discontinuity Design. Finally, we find that, everything else being equal, higher local taxes actually deter firms from investing in a given zone.

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File URL: http://www.insee.fr/en/publications-et-services/docs_doc_travail/G2006-14.pdf
File Function: Document de travail de la DESE numéro G2006-14
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Bibliographic Info

Paper provided by Institut National de la Statistique et des Etudes Economiques, DESE in its series Documents de Travail de la DESE - Working Papers of the DESE with number g2006-14.

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Date of creation: 2006
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Handle: RePEc:crs:wpdeee:g2006-14

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Related research

Keywords: local attractivity; local taxes; plant location decisions; regression discontinuity design; Poisson regression; spatial economics;

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  1. Paulo Guimaraes & Octavio Figueiredo & Douglas Woodward, 2000. "A tractable approach to the firm location decision problem," NIMA Working Papers 2, Núcleo de Investigação em Microeconomia Aplicada (NIMA), Universidade do Minho.
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