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Interstate Business Tax Differentials and New Firm Location: Evidence from Panel Data

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  • Leslie E. Papke

Abstract

This paper examines the impact of state and local tax differentials on the location of industry using a panel data set of manufacturing firm startups. The number of firm births is modeled as a Poisson count process and the estimation technique explicitly accounts for unobserved location or state heterogeneity in the estimation. A second focus of the analysis is the development of an industry and year specific series of effective tax rates for each state. After controlling for state and industry effects, the estimates indicate that a high state marginal effective tax rate reduces the number of firm births for most industries examined.

Suggested Citation

  • Leslie E. Papke, 1989. "Interstate Business Tax Differentials and New Firm Location: Evidence from Panel Data," NBER Working Papers 3184, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:3184
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    References listed on IDEAS

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    1. David F. Bradford & Don Fullerton, 1981. "Pitfalls in the Construction and Use of Effective Tax Rates," NBER Working Papers 0688, National Bureau of Economic Research, Inc.
    2. King, Mervyn A. & Fullerton, Don, 2010. "The Taxation of Income from Capital," National Bureau of Economic Research Books, University of Chicago Press, number 9780226436319, August.
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    4. Helms, L Jay, 1985. "The Effect of State and Local Taxes on Economic Growth: A Time Series-Cross Section Approach," The Review of Economics and Statistics, MIT Press, vol. 67(4), pages 574-582, November.
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    8. Carlton, Dennis W, 1983. "The Location and Employment Choices of New Firms: An Econometric Model with Discrete and Continuous Endogenous Variables," The Review of Economics and Statistics, MIT Press, vol. 65(3), pages 440-449, August.
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