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The Effect of Sales Taxes on Employment: New Evidence From Cross-Border Panel Data Analysis

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  • Thompson, Jeffrey P.
  • Rohlin, Shawn M.

Abstract

This paper estimates the effect of sales taxes on employment using county-level quarterly data and a "border approach," comparing employment changes for counties in states that raised sales tax rates with their cross-border neighbors. We augment standard distance-related border measures with an economically-oriented border measure based on the share of county residents who work in a neighboring state. We find that the employment effects are larger in the retail trade industry and for female workers, and that they are concentrated in counties with relatively large shares of residents working in another state.

Suggested Citation

  • Thompson, Jeffrey P. & Rohlin, Shawn M., 2012. "The Effect of Sales Taxes on Employment: New Evidence From Cross-Border Panel Data Analysis," National Tax Journal, National Tax Association, vol. 65(4), pages 1023-1041, December.
  • Handle: RePEc:ntj:journl:v:65:y:2012:i:4:p:1023-41
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    References listed on IDEAS

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    1. Walsh, Michael J. & Jones, Jonathan D., 1988. "More Evidence on the "Border Tax" Effect: The Case of West Virginia, 1979-84," National Tax Journal, National Tax Association, vol. 41(2), pages 261-65, June.
    2. Rohlin, Shawn & Rosenthal, Stuart S. & Ross, Amanda, 2014. "Tax avoidance and business location in a state border model," Journal of Urban Economics, Elsevier, vol. 83(C), pages 34-49.
    3. Ronald C. Fisher, 1980. "Local Sales Taxes: Tax Rate Differentials, Sales Loss, and Revenue Estimation," Public Finance Review, , vol. 8(2), pages 171-188, April.
    4. Andrés Leal & Julio López-Laborda & Fernando Rodrigo, 2010. "Cross-Border Shopping: A Survey," International Advances in Economic Research, Springer;International Atlantic Economic Society, pages 135-148.
    5. John M. Abowd & Bryce E. Stephens & Lars Vilhuber & Fredrik Andersson & Kevin L. McKinney & Marc Roemer & Simon Woodcock, 2009. "The LEHD Infrastructure Files and the Creation of the Quarterly Workforce Indicators," NBER Chapters,in: Producer Dynamics: New Evidence from Micro Data, pages 149-230 National Bureau of Economic Research, Inc.
    6. repec:kap:iaecre:v:16:y:2010:i:2:p:135-148 is not listed on IDEAS
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    Cited by:

    1. Beatrix Eugster & Raphaël Parchet, 2011. "Culture and Taxes: Towards Identifying Tax Competition," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 11.05, Université de Lausanne, Faculté des HEC, DEEP.
    2. Agrawal, David R., 2014. "LOST in America: Evidence on local sales taxes from national panel data," Regional Science and Urban Economics, Elsevier, vol. 49(C), pages 147-163.
    3. Daria Burnes & David Neumark & Michelle J. White, 2014. "Fiscal Zoning and Sales Taxes: Do Higher Sales Taxes Lead to More Retailing and Less Manufacturing?," National Tax Journal, National Tax Association, pages 7-50.
    4. Jeffrey P. Thompson & Shawn M. Rohlin, 2013. "The effect of state and local sales taxes on employment at state borders," Finance and Economics Discussion Series 2013-49, Board of Governors of the Federal Reserve System (U.S.).

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