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Local Fiscal Policy and Establishment Growth


  • Gabe, Todd M.


This applied study examines the effects of local taxes and government spending on the employment growth of 17,172 Maine establishments that were in operation in 1996 and 1999. Empirical results indicate that taxes have a negative effect on an establishment’s three-year employment growth rate, although the tax effects are quite small in magnitude. These results are robust to the omission of establishments located in municipalities that cause group effects in the regression analysis. The negative tax effects are not statistically significant, however, in regressions that correct for sample selection bias related to establishment closures. In general, the empirical findings do not reveal a significant relationship between establishment growth and several types of local government spending.

Suggested Citation

  • Gabe, Todd M., 2003. "Local Fiscal Policy and Establishment Growth," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 33(1).
  • Handle: RePEc:ags:jrapmc:132246

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    Cited by:

    1. Richard Kneller & Florian Misch, 2014. "The Effects Of Public Spending Composition On Firm Productivity," Economic Inquiry, Western Economic Association International, vol. 52(4), pages 1525-1542, October.
    2. Backman, Mikaela & Gabe, Todd & Mellander, Charlotta, 2016. "Effects of Human Capital on the Growth and Survival of Swedish Businesses," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 46(1).
    3. Rork, Jonathan C., 2005. "Getting What You Pay For: The Case of Southern Economic Development," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 35(2).
    4. Andrea Lasagni & Annamaria Nifo & Gaetano Vecchione, 2015. "Firm Productivity And Institutional Quality: Evidence From Italian Industry," Journal of Regional Science, Wiley Blackwell, vol. 55(5), pages 774-800, November.
    5. Crosby, Andrew W. & Merriman, David F., 2016. "What Happened to Illinois’ Economy Following the January 2011 Tax Increases? A Midwestern Comparison," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 46(1).

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