Working Paper: CEPR ID: DP5856
Authors: Gilles Duranton; Laurent Gobillon; Henry G. Overman
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.
Keywords: borders; local taxation; regression discontinuity; spatial differencing
JEL Codes: H22; H71; R38
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| unobserved site characteristics (C21) | employment growth (O49) |
| local taxation (H71) | unobserved site characteristics (C21) |
| local taxation (H71) | employment growth (O49) |
| local taxation (H71) | entry of new establishments (L26) |
| jurisdictional boundaries (H73) | employment growth (O49) |