The effects of business taxes on production location under technology uncertainty

Lin-Ti Tan
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Lin-Ti Tan: Institute of Economics, Academia Sinica, Nankang, Taipei 115, Taiwan

The Annals of Regional Science, 1999, vol. 33, issue 4, 522 pages

Abstract: This paper attempts to examine the impact of various forms of taxation on the firm's optimal plant location in a world with technology uncertainty, where the location as well as production decisions are determined ax ante, and the specifications of production function and technology uncertainty are in a general form. Our analysis shows that the imposition of business taxes is, in general, spatially nonneutral in the presence of technology uncertainty. Most pointedly, this paper demonstrates that, in addition to factors such as the firm's attitude toward risk and its production technology, "how an input affects risk" plays a significant role in determining the impact of taxation on production location.

Date: 1999-11-25
Note: Received: August 1997/Accepted: June 1998
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