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

Federico Belotti, Edoardo Di Porto and Gianluca Santoni

No 2016:3, Working Paper Series from Uppsala University, Department of Economics

Abstract: 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 es- timator which allows to tackle the endogeneity of local taxation. As well as providing robust inference to arbitrary cross-sectional dependence and serial correlation, our em- pirical 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.

Keywords: Local taxation; endogeneity; spatial differencing; generalized method of moments; two-way clustering (search for similar items in EconPapers)
JEL-codes: H22 H71 R38 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2016-02-11
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Related works:
Journal Article: The effect of local taxes on firm performance: Evidence from geo‐referenced data (2021)
Working Paper: The effect of local taxes on firm performance: evidence from geo referenced data (2016)
Working Paper: The Effect of Local Taxes on Firm Performance: Evidence from Geo-referenced Data (2016)
Working Paper: The Effect of Local Taxes on Firm Performance: Evidence from Geo-referenced Data (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:uunewp:2016_003

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