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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.

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File URL: http://purl.umn.edu/132246
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Article provided by Mid-Continent Regional Science Association in its journal Journal of Regional Analysis and Policy.

Volume (Year): 33 (2003)
Issue (Month): 1 ()
Pages:

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Handle: RePEc:ags:jrapmc:132246
Contact details of provider: Web page: http://jrap-journal.org/index.htm

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  1. Timothy J. Bartik, 1991. "Who Benefits from State and Local Economic Development Policies?," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number wbsle, November.
  2. McGranahan, David A., 1998. "Local Problems Facing Manufacturers: Results of the ERS Rural Manufacturing Survey," Agricultural Information Bulletins 33765, United States Department of Agriculture, Economic Research Service.
  3. Heckman, James J, 1979. "Sample Selection Bias as a Specification Error," Econometrica, Econometric Society, vol. 47(1), pages 153-61, January.
  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.
  5. Dunne, T. & Roberts, M.J. & Samuelson, L., 1988. "The Growth And Failure Of U.S. Manufacturing Plants," Papers 1-87-5, Pennsylvania State - Department of Economics.
  6. Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-70, May.
  7. Bartik, Timothy J, 1985. "Business Location Decisions in the United States: Estimates of the Effects of Unionization, Taxes, and Other Characteristics of States," Journal of Business & Economic Statistics, American Statistical Association, vol. 3(1), pages 14-22, January.
  8. Moulton, Brent R, 1987. "Diagnostics for Group Effects in Regression Analysis," Journal of Business & Economic Statistics, American Statistical Association, vol. 5(2), pages 275-82, April.
  9. James J. Heckman, 1976. "The Common Structure of Statistical Models of Truncation, Sample Selection and Limited Dependent Variables and a Simple Estimator for Such Models," NBER Chapters, in: Annals of Economic and Social Measurement, Volume 5, number 4, pages 475-492 National Bureau of Economic Research, Inc.
  10. Stephen Hymer & Peter Pashigian, 1962. "Firm Size and Rate of Growth," Journal of Political Economy, University of Chicago Press, vol. 70, pages 556.
  11. Evans, David S., 1986. "Tests of Alternative Theories of Firm Growth," Working Papers 86-36, C.V. Starr Center for Applied Economics, New York University.
  12. Evans, Paul & Karras, Georgios, 1994. "Are Government Activities Productive? Evidence from a Panel of U.S. States," The Review of Economics and Statistics, MIT Press, vol. 76(1), pages 1-11, February.
  13. Hall, Bronwyn H, 1987. "The Relationship between Firm Size and Firm Growth in the U.S. Manufacturing Sector," Journal of Industrial Economics, Wiley Blackwell, vol. 35(4), pages 583-606, June.
  14. Ronald C. Fisher, 1997. "Effects of state and local public services on economic development," New England Economic Review, Federal Reserve Bank of Boston, issue Mar, pages 53-82.
  15. Newman, Robert J. & Sullivan, Dennis H., 1988. "Econometric analysis of business tax impacts on industrial location: What do we know, and how do we know it?," Journal of Urban Economics, Elsevier, vol. 23(2), pages 215-234, March.
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