TAX DIFFERENTIALS AND INDUSTRIAL LOCATION
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Date
1984-05
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Institute for Policy Studies, Johns Hopkins University
Abstract
This study concludes that tax differencials may be an important locational factor, not only inside metropolitan areas, but also at other spatial scales. This finding is against what it is commonly believe among academics, and against what I expect at the onset of my research. This conclusion is reached after proving that tax differentials in many cases can increase or decrease profits more than any other cost differential, after criticizing the literature on the issue, and after refuting the main theoretical arguments against the effects of taxes on location. The result is particularly relevant for those businesses whose revenues do not depend on being in a specific location. In terms of number of establishments they may may not be very important. But in terms of employment they may represent a large proportion of at least manufacturing and wholesale. And among manufacturing, the high technology firms may be one of the sectors more sensitive to tax differentials.
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Keywords
Fiscal Policy, Enterprise Zone Policy