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Assessing the Effects of Local Taxation Using Microgeographic Data

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  • Duranton, Gilles
  • Gobillon, Laurent
  • Overman, Henry G

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 unobserved time-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 on employment growth, but no effect on entry.

Suggested Citation

  • Duranton, Gilles & Gobillon, Laurent & Overman, Henry G, 2006. "Assessing the Effects of Local Taxation Using Microgeographic Data," CEPR Discussion Papers 5856, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:5856
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    More about this item

    Keywords

    borders; local taxation; regression discontinuity; spatial differencing;
    All these keywords.

    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, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Government Policy

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