The effect of local taxes on firm performance: Evidence from geo-referenced data

Arbeitspapier

This paper studies the impact of municipal non-residential property taxation on firms' performance using a panel data of italian manufacturing firms in 2001-2010. In the spirit of Duranton et al. (2011), we use a pairwise spatial difference instrumental variable estimator which allows to tackle the endogeneity of local taxation. As well as providing robust inference to arbitrary cross-sectional dependence and serial correlation, our empirical strategy also improves on existing work by exploiting the exogenous variation in local taxes generated by the political alignment of each jurisdiction with the central government. We find that non-residential property taxation exert a negative impact on firms' employment, capital and sales to such an extent as to significantly affect total factor productivity.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. 2016:3

Classification and Topics

• Classification: Wirtschaft ; Taxation and Subsidies: Incidence ; State and Local Taxation, Subsidies, and Revenue ; Production Analysis and Firm Location: Government Policy
• Subject: Local taxation ; endogeneity ; spatial differencing ; generalized method of moments ; two-way clustering

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Belotti, Federico ; Di Porto, Edoardo ; Santoni, Gianluca
• Event: Veröffentlichung
• (who): Uppsala University, Department of Economics
• (where): Uppsala
• (when): 2016

Further information

• Handle: http://hdl.handle.net/10419/168394
• URN: urn:nbn:se:uu:diva-277268
• Last update: 10.03.2025, 11:45 AM CET