The Aggregate Consequences of Local Capital Taxation

Antonin Bergeaud, Brouillette, Jean-Félix, Louis de Lachapelle and Malgouyres, Clément

No 21367, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We study the repeal of France’s Taxe Professionnelle, a large and spatially dispersed local capital tax whose rates were set by nearly 35,000 municipalities. Combining administrative data with a dynamic spatial general equilibrium model disciplined by reduced-form estimates of firms’ investment responses, we find that the reform raises real income per worker by 5.1% in the long run and worker welfare by 2.6% in consumption-equivalent terms, accounting for transition dynamics. Counterfactuals isolating the level and spatial dispersion of taxes reveal that reducing the level, which triggers capital deepening, drives the bulk of income gains. Removing spatial dispersion alone reduces income per worker but raises welfare, as spatial frictions and compensating differentials redirect activity from productive locations toward high-amenity destinations.

JEL-codes: E22 H25 H71 R58 (search for similar items in EconPapers)
Date: 2026-04
References: Add references at CitEc
Citations:

Downloads: (external link)
https://cepr.org/publications/DP21367 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:21367

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP21367

Access Statistics for this paper

More papers in CEPR Discussion Papers from Centre for Economic Policy Research 33 Great Sutton Street, London EC1V 0DX, UK.
Bibliographic data for series maintained by CEPR ().