Race to the Bottom? Local Tax Break Competition and Business Location

• 成果类型: Article
• 署名作者: Mast, Evan
• 署名单位: W.E. Upjohn Institute for Employment Research
• 刊物名称: AMERICAN ECONOMIC JOURNAL-APPLIED ECONOMICS
• ISSN/ISSBN: 1945-7782
• DOI: 10.1257/app.20170511
• 发表日期: 2020
• 页码: 288-317
• 关键词: state; governments; taxation

摘要

I analyze how competition between localities affects tax breaks and business location decisions. I first use a geographic instrument to show that spatial competition substantially increases firm-specific property tax breaks. I then use this pattern to estimate a model of localities competing for mobile firms by offering tax exemptions. In counterfactual exercises, restricting which levels of government can offer tax breaks has little effect on equilibrium business locations but lowers total exemptions by 30 percent. This suggests that local tax break competition primarily reduces taxes for mobile firms and is unlikely to substantially affect the efficiency of business location.