The Effect of Local Taxes on Firm Performance: Evidence from Geo-Referenced Data | Zendy

Federico Belotti | Zendy; Edoardo Di Porto | Zendy; Gianluca Santoni | Zendy

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

Author(s) -

Federico Belotti,

Edoardo Di Porto,

Gianluca Santoni

Publication year - 2016

Publication title -

ssrn electronic journal

Language(s) - English

Resource type - Journals

ISSN - 1556-5068

DOI - 10.2139/ssrn.2764349

Subject(s) - endogeneity , productivity , exploit , panel data , econometrics , total factor productivity , local government , economics , estimator , capital (architecture) , work (physics) , spatial econometrics , local property , property tax , public economics , macroeconomics , tax reform , statistics , computer science , mechanical engineering , history , computer security , mathematics , archaeology , public administration , pure mathematics , political science , engineering

This paper investigates the impact of business property taxation on firms' performance using a panel of Italian manufacturing firms. To account for endogeneity in local taxation, we exploit a pairwise spatial differenced generalized method of moments estimator. As well as providing robust inference, we also improve on existing work by exploiting the exogenous variation in local taxes generated by the political alignment of each local government with the central one. We find that property taxation exerts a negative impact on firms' employment, capital and sales to such an extent as to significantly affect total factor productivity.

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