IDEAS home Printed from https://ideas.repec.org/a/spr/eurase/v13y2023i1d10.1007_s40822-022-00223-7.html
   My bibliography  Save this article

Do fiscal policies affect the firms’ growth and performance? Urban versus rural area

Author

Listed:
  • Alessandra Amendola

    (University of Salerno)

  • Marinella Boccia

    (University of Salerno)

  • Gianluca Mele

    (World Bank)

  • Luca Sensini

    (DISA-MIS, University of Salerno)

Abstract

In this paper, we investigate the effect of the corporate income tax (CIT) on firm performance in the Dominican Republic (DR) by focusing on both the national and regional levels. The analysis is based on data provided by the local authorities of the DR to the World Bank and comprises administrative CIT declarations by over 18,000 firms distributed across 31 provinces for the period from 2006 to 2015. We use propensity score matching method along with some opportunely selected financial indicators as proxies for firm performance. The overall results show that CIT incentives have a positive effect on growth and on most performance indicators; however, significant differences still arise between regions.

Suggested Citation

  • Alessandra Amendola & Marinella Boccia & Gianluca Mele & Luca Sensini, 2023. "Do fiscal policies affect the firms’ growth and performance? Urban versus rural area," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 13(1), pages 1-33, March.
    • Handle: RePEc:spr:eurase:v:13:y:2023:i:1:d:10.1007_s40822-022-00223-7
    DOI: 10.1007/s40822-022-00223-7
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s40822-022-00223-7
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s40822-022-00223-7?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Devereux, Michael P. & Maffini, Giorgia & Xing, Jing, 2018. "Corporate tax incentives and capital structure: New evidence from UK firm-level tax returns," Journal of Banking & Finance, Elsevier, vol. 88(C), pages 250-266.
    2. Pierre-André Julien, 2019. "The regional variations of entrepreneurial dynamism: a mixed methods study," Entrepreneurship & Regional Development, Taylor & Francis Journals, vol. 31(9-10), pages 874-907, October.
    3. Bondonio, Daniele & Engberg, John, 2000. "Enterprise zones and local employment: evidence from the states' programs," Regional Science and Urban Economics, Elsevier, vol. 30(5), pages 519-549, September.
    4. Czarnitzki, Dirk & Hanel, Petr & Rosa, Julio Miguel, 2011. "Evaluating the impact of R&D tax credits on innovation: A microeconometric study on Canadian firms," Research Policy, Elsevier, vol. 40(2), pages 217-229, March.
    5. Nadja Dwenger & Viktor Steiner, 2014. "Financial leverage and corporate taxation: evidence from German corporate tax return data," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 21(1), pages 1-28, February.
    6. Matias Busso & Patrick Kline, 2008. "Do Local Economic Development Programs Work? Evidence from the Federal Empowerment Zone Program," Cowles Foundation Discussion Papers 1639, Cowles Foundation for Research in Economics, Yale University.
    7. Marco Caliendo & Sabine Kopeinig, 2008. "Some Practical Guidance For The Implementation Of Propensity Score Matching," Journal of Economic Surveys, Wiley Blackwell, vol. 22(1), pages 31-72, February.
    8. Nestor Duch Brown & Daniel Montolio Estivill & Mauro Mediavilla, 2007. "Evaluating the Impact of Public Subsidies on a Firms Performance: a Quasi-experimental Approach," Working Papers in Economics 181, Universitat de Barcelona. Espai de Recerca en Economia.
    9. Afonso, Oscar & Silva, Armando, 2012. "Non-scale endogenous growth effects of subsidies for exporters," Economic Modelling, Elsevier, vol. 29(4), pages 1248-1257.
    10. Bernini, Cristina & Pellegrini, Guido, 2011. "How are growth and productivity in private firms affected by public subsidy? Evidence from a regional policy," Regional Science and Urban Economics, Elsevier, vol. 41(3), pages 253-265, May.
    11. repec:ocp:rpaper:rp-16/03 is not listed on IDEAS
    12. Jens Matthias Arnold & Aaditya Mattoo & Gaia Narciso, 2008. "Services Inputs and Firm Productivity in Sub-Saharan Africa: Evidence from Firm-Level Data," Journal of African Economies, Centre for the Study of African Economies, vol. 17(4), pages 578-599, August.
    13. Hanson, Andrew, 2009. "Local employment, poverty, and property value effects of geographically-targeted tax incentives: An instrumental variables approach," Regional Science and Urban Economics, Elsevier, vol. 39(6), pages 721-731, November.
    14. Jeffrey Bernstein & Anwar Shah, 1994. "Taxes and production: The case of Pakistan," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 1(3), pages 227-245, October.
    15. Faini, Riccardo & Schiantarelli, Fabio, 1987. "Incentives and Investment Decisions: The Effectiveness of Regional Policy," Oxford Economic Papers, Oxford University Press, vol. 39(3), pages 516-533, September.
    16. Marlon G. Boarnet, 2001. "Enterprise Zones and Job Creation: Linking Evaluation and Practice," Economic Development Quarterly, , vol. 15(3), pages 242-254, August.
    17. Morrisset, Jacques & Pirnia, Neda, 2000. "How tax policy and incentives affect foreign direct investment - a review," Policy Research Working Paper Series 2509, The World Bank.
    18. Clarke, George, 2012. "Manufacturing firms in Africa: Some stylized facts about wages and productivity," MPRA Paper 36122, University Library of Munich, Germany.
    19. John Goddard & Manouche Tavakoli & John Wilson, 2005. "Determinants of profitability in European manufacturing and services: evidence from a dynamic panel model," Applied Financial Economics, Taylor & Francis Journals, vol. 15(18), pages 1269-1282.
    20. Heckman, James J. & Lalonde, Robert J. & Smith, Jeffrey A., 1999. "The economics and econometrics of active labor market programs," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 31, pages 1865-2097, Elsevier.
    21. Anah� Briozzo & Clara Cardone-Riportella, 2016. "Spanish SMEs' Subsidized and Guaranteed Credit during Economic Crisis: A Regional Perspective," Regional Studies, Taylor & Francis Journals, vol. 50(3), pages 496-512, March.
    22. Bronzini, Raffaello & de Blasio, Guido, 2006. "Evaluating the impact of investment incentives: The case of Italy's Law 488/1992," Journal of Urban Economics, Elsevier, vol. 60(2), pages 327-349, September.
    23. Lee, Jong-Wha, 1996. "Government Interventions and Productivity Growth," Journal of Economic Growth, Springer, vol. 1(3), pages 391-414, September.
    24. J. W. Fedderke & B. G. Teubes, 2011. "Fiscal incentives for research and development," Applied Economics, Taylor & Francis Journals, vol. 43(14), pages 1787-1800.
    25. Emmanuel Cleeve, 2008. "How effective are fiscal incentives to attract FDI to Sub-Saharan Africa?," Journal of Developing Areas, Tennessee State University, College of Business, vol. 42(1), pages 135-153, September.
    26. Alessandro Zeli & Paolo Mariani, 2009. "Productivity and profitability analysis of large Italian companies: 1998–2002," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 56(2), pages 175-188, June.
    27. Bondonio, Daniele & Greenbaum, Robert T., 2007. "Do local tax incentives affect economic growth? What mean impacts miss in the analysis of enterprise zone policies," Regional Science and Urban Economics, Elsevier, vol. 37(1), pages 121-136, January.
    28. Porter, Michael E, 1979. "The Structure within Industries and Companies' Performance," The Review of Economics and Statistics, MIT Press, vol. 61(2), pages 214-227, May.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Alessandra Amendola & Marinella Boccia & Gianluca Mele & Luca Sensini, 2020. "Fiscal Policies and Performance: Evidence from Dominican Republic firms," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 10(5), pages 1-16.
    2. Neumark, David & Simpson, Helen, 2015. "Place-Based Policies," Handbook of Regional and Urban Economics, in: Gilles Duranton & J. V. Henderson & William C. Strange (ed.), Handbook of Regional and Urban Economics, edition 1, volume 5, chapter 0, pages 1197-1287, Elsevier.
    3. Bernini, Cristina & Pellegrini, Guido, 2011. "How are growth and productivity in private firms affected by public subsidy? Evidence from a regional policy," Regional Science and Urban Economics, Elsevier, vol. 41(3), pages 253-265, May.
    4. Krupka, Douglas J. & Noonan, Douglas S., 2009. "Empowerment Zones, neighborhood change and owner-occupied housing," Regional Science and Urban Economics, Elsevier, vol. 39(4), pages 386-396, July.
    5. Neumark, David & Kolko, Jed, 2010. "Do enterprise zones create jobs? Evidence from California's enterprise zone program," Journal of Urban Economics, Elsevier, vol. 68(1), pages 1-19, July.
    6. Accetturo, Antonio & de Blasio, Guido, 2012. "Policies for local development: An evaluation of Italy's “Patti Territoriali”," Regional Science and Urban Economics, Elsevier, vol. 42(1-2), pages 15-26.
    7. Bernini, Cristina & Pellegrini, Guido, 2013. "Is subsidising tourism firms an effective use of public funds?," Tourism Management, Elsevier, vol. 35(C), pages 156-167.
    8. Krupka, Douglas J. & Noonan, Douglas S., 2009. "Neighborhood Dynamics and the Housing Price Effects of Spatially Targeted Economic Development Policy," IZA Discussion Papers 4308, Institute of Labor Economics (IZA).
    9. Pender, John & Reeder, Richard, 2011. "Impacts of Regional Approaches to Rural Development: Initial Evidence on the Delta Regional Authority," Economic Research Report 262240, United States Department of Agriculture, Economic Research Service.
    10. Sumei Zhang, 2020. "Do Research Methods Matter in Enterprise Zone Outcome Evaluations?," Economic Development Quarterly, , vol. 34(3), pages 299-309, August.
    11. Gibbons, Stephen & Overman, Henry & Sarvimäki, Matti, 2021. "The local economic impacts of regeneration projects: Evidence from UK's single regeneration budget," Journal of Urban Economics, Elsevier, vol. 122(C).
    12. Gobillon, Laurent & Magnac, Thierry & Selod, Harris, 2012. "Do unemployed workers benefit from enterprise zones? The French experience," Journal of Public Economics, Elsevier, vol. 96(9-10), pages 881-892.
    13. Sumei Zhang, 2015. "Impacts of Enterprise Zone Policy on Industry Growth," Economic Development Quarterly, , vol. 29(4), pages 347-362, November.
    14. Givord, Pauline & Rathelot, Roland & Sillard, Patrick, 2013. "Place-based tax exemptions and displacement effects: An evaluation of the Zones Franches Urbaines program," Regional Science and Urban Economics, Elsevier, vol. 43(1), pages 151-163.
    15. Judith K. Hellerstein & David Neumark, 2011. "Employment in Black Urban Labor Markets: Problems and Solutions," NBER Working Papers 16986, National Bureau of Economic Research, Inc.
    16. Garsous, Grégoire & Corderi, David & Velasco, Mercedes, 2015. "Tax Incentives and Job Creation in the Tourism Industry of Brazil," IDB Publications (Working Papers) 7324, Inter-American Development Bank.
    17. Joel A. Elvery, 2009. "The Impact of Enterprise Zones on Resident Employment," Economic Development Quarterly, , vol. 23(1), pages 44-59, February.
    18. Sumei Zhang, 2019. "Rethinking U.S. enterprise zones: The role of research design in program evaluation," Local Economy, London South Bank University, vol. 34(6), pages 545-571, September.
    19. Ham, John C. & Swenson, Charles & Imrohoroglu, Ayse & Song, Heonjae, 2011. "Government programs can improve local labor markets: Evidence from State Enterprise Zones, Federal Empowerment Zones and Federal Enterprise Community," Journal of Public Economics, Elsevier, vol. 95(7-8), pages 779-797, August.
    20. repec:ocp:rpaper:rp-16/03 is not listed on IDEAS
    21. Kölling Arnd, 2016. "Developing Eastern Germany: The Effects of Economics Promotion in the Eastern German States after Reunification," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 236(2), pages 275-295, March.

    More about this item

    Keywords

    Fiscal incentive; Corporate Income Tax; Regional studies; Propensity score matching;
    All these keywords.

    JEL classification:

    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O2 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy
    • O23 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development
    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:eurase:v:13:y:2023:i:1:d:10.1007_s40822-022-00223-7. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.