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Do Tax Incentives Affect Business Location? Evidence from Motion Picture Production Incentives

Listed author(s):
  • Patrick Button

    ()

    (Department of Economics, Tulane University)

I provide the first estimates of the impacts of recently-popular motion picture production incentives on filming location, establishment location, and employment using panel regression. Filming in this industry is relatively footloose, and these incentives are numerous and strong, so this is a good case study to bound the effects of tax incentives on business location. For data, I compile a detailed database of incentives across U.S. states since 2012, matching this with filming data from IMDb.com and Studio System, and establishment and employment counts from the QCEW. I compare these outcomes in states before and after they adopt incentives, relative to similar states that did not adopt incentives over the same time period (a panel difference-in-differences). I find that incentives increase filming of IMDb productions and Studio System TV series, but there is no effect on Studio System feature films or business establishments in the industry. I find evidence of employment effects but this evidence is generally marginally significant and not of a large magnitude. These results show that the ability for tax incentives to affect business location decisions is mixed, suggesting that even in this extreme 'footloose' case there could be no effect of incentives.

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File URL: http://econ.tulane.edu/RePEc/pdf/tul1507r.pdf
File Function: Revised Vresion, October 2016
Download Restriction: no

Paper provided by Tulane University, Department of Economics in its series Working Papers with number 1507.

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Date of creation: Jul 2015
Date of revision: Oct 2016
Handle: RePEc:tul:wpaper:1507
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  1. Papke, Leslie E., 1991. "Interstate business tax differentials and new firm location : Evidence from panel data," Journal of Public Economics, Elsevier, vol. 45(1), pages 47-68, June.
  2. Robert Tannenwald, 1996. "State business tax climate: how should it be measured and how important is it?," New England Economic Review, Federal Reserve Bank of Boston, issue Jan, pages 23-38.
  3. Enrico Moretti & Daniel J. Wilson, 2013. "State Incentives for Innovation, Star Scientists, and Jobs: Evidence from Biotech," Upjohn Working Papers and Journal Articles 14-203, W.E. Upjohn Institute for Employment Research.
  4. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2002. "How Much Should We Trust Differences-in-Differences Estimates?," NBER Working Papers 8841, National Bureau of Economic Research, Inc.
  5. Lee, Yoonsoo, 2008. "Geographic redistribution of US manufacturing and the role of state development policy," Journal of Urban Economics, Elsevier, vol. 64(2), pages 436-450, September.
  6. Jonathan Meer & Jeremy West, 2013. "Effects of the Minimum Wage on Employment Dynamics," NBER Working Papers 19262, National Bureau of Economic Research, Inc.
  7. Timothy J. Bartik, 2010. "Small Business Start-Ups in the United States: Estimates of the Effects of Characteristics of States," Book chapters authored by Upjohn Institute researchers, in: Zolton Acs (ed.), Entrepreneurship and regional Development, pages 155-169 W.E. Upjohn Institute for Employment Research.
  8. Abadie, Alberto & Diamond, Alexis & Hainmueller, Jens, 2010. "Synthetic Control Methods for Comparative Case Studies: Estimating the Effect of California’s Tobacco Control Program," Journal of the American Statistical Association, American Statistical Association, vol. 105(490), pages 493-505.
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