Local Policy Misperceptions and Investment: Experimental Evidence from Firm Decision Makers

Sebastian Blesse, Florian Buhlmann, Philipp Heil and Davud Rostam-Afschar

No 11855, CESifo Working Paper Series from CESifo

Abstract: We study firm responses to local policies through a survey experiment, providing randomized information on the competitiveness of business tax rates and highway access in their headquarters’ municipality. Firms often misperceive local policy competitiveness, especially for tax rates. Investment decisions respond asymmetrically to tax competitiveness. Positive tax rank information reduces investment intentions in neighboring municipalities. Compared to this, negative tax news increase relocation plans. However, most firms receiving bad news plan to continue investing in their headquarters’ municipality, indicating home bias. These effects are strongest for mobile firms and corporations. Negative infrastructure news lower location satisfaction but do not influence investment.

Keywords: tax competition; infrastructure; firm location; survey experiment. (search for similar items in EconPapers)
JEL-codes: H25 H32 H71 H72 H73 L21 R38 (search for similar items in EconPapers)
Date: 2025
New Economics Papers: this item is included in nep-exp and nep-pbe
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Working Paper: Local Policy Misperceptions and Investment: Experimental Evidence from Firm Decision Makers (2025)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_11855

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