This paper investigates the effect of local property tax for businesses on firm performance by using a panel of Italian manufacturing firms. To identify this effect, we implement a pairwise spatial‐differenced estimator and exploit the exogenous variation in local property tax rates caused by the political alignment of local and central governments. We find that business property taxation has a sizeable negative impact on equipment, the more volatile part of tangible assets, employment, and value‐added. We interpret these results as evidence of a distortionary mechanism. When heavy equipment are included in the business property tax base, as was the case in Italy during our estimation period, business property taxation depresses investment and induces firms to also reduce output and downsize.

Belotti, F., Di Porto, E., Santoni, G. (2021). The effect of local taxes on firm performance: Evidence from geo‐referenced data. JOURNAL OF REGIONAL SCIENCE [10.1111/jors.12518].

The effect of local taxes on firm performance: Evidence from geo‐referenced data

Belotti, Federico
;
2021-01-01

Abstract

This paper investigates the effect of local property tax for businesses on firm performance by using a panel of Italian manufacturing firms. To identify this effect, we implement a pairwise spatial‐differenced estimator and exploit the exogenous variation in local property tax rates caused by the political alignment of local and central governments. We find that business property taxation has a sizeable negative impact on equipment, the more volatile part of tangible assets, employment, and value‐added. We interpret these results as evidence of a distortionary mechanism. When heavy equipment are included in the business property tax base, as was the case in Italy during our estimation period, business property taxation depresses investment and induces firms to also reduce output and downsize.
gen-2021
Pubblicato
Rilevanza internazionale
Articolo
Esperti anonimi
Settore SECS-P/05 - ECONOMETRIA
English
Con Impact Factor ISI
endogeneity; local taxation; spatial differencing
Belotti, F., Di Porto, E., Santoni, G. (2021). The effect of local taxes on firm performance: Evidence from geo‐referenced data. JOURNAL OF REGIONAL SCIENCE [10.1111/jors.12518].
Belotti, F; Di Porto, E; Santoni, G
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/2108/262040
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