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The impact of local taxes on plants location decision

Author

Listed:
  • R. RATHELOT

    (Insee)

  • P. SILLARD

    (Insee)

Abstract

Determinants of plant locations are known to be multiple. Locations of partners and competitors are crucial, as well as the territory's local characteristics. Some local characteristics can be natural. Others, like local taxes, reflect local agents' decisions. To what extent are local taxes taken into consideration during the plant location process? We build a Poisson model to explain the number of firm creations observed in a given municipality in a given year. Correlations and first results tend to show that there exists some unobserved attractivity factors correlated with the level of local taxes. To deal with endogeneity, we present an approach close to the Regression Discontinuity Design. Finally, we find that, everything else being equal, higher local taxes actually deter firms from investing in a given zone.

Suggested Citation

  • R. Rathelot & P. Sillard, 2006. "The impact of local taxes on plants location decision," Documents de Travail de l'Insee - INSEE Working Papers g2006-14, Institut National de la Statistique et des Etudes Economiques.
    • Handle: RePEc:nse:doctra:g2006-14
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    File URL: https://www.bnsp.insee.fr/ark:/12148/bc6p06zr0xv/f1.pdf
    File Function: Document de travail de la DESE numéro G2006-14
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    More about this item

    Keywords

    local attractivity; local taxes; plant location decisions; regression discontinuity design; Poisson regression; spatial economics;
    All these keywords.

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R15 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Econometric and Input-Output Models; Other Methods

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