The Effect of Local Taxes on Firm Performance: Evidence from Geo-referenced Data

Federico Belotti, Edoardo Di Porto and Gianluca Santoni

CSEF Working Papers from Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy

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 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.

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)
Date: 2016-02-13
New Economics Papers: this item is included in nep-eff, nep-eur, nep-geo, nep-pbe and nep-ure
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:sef:csefwp:430

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