The effect of business taxation on the location of industry |
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Authors: | Ronald E. Grieson William Hamovitch Albert M. Levenson Richard D. Morgenstern |
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Affiliation: | 1. Columbia University, New York, New York 10027, U.S.A.;2. Queens College, CUNY, Flushing, New York 11367 U.S.A. |
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Abstract: | A theoretical and econometric model is specified which permits the estimation of the effect of local taxes on economic activity in a locality. A location elasticity of ?0.35 is found for manufacturing activity in New York City with respect to business taxes, while no significant elasticity is found for nonmanufacturing activity. The deadweight losses and revenue effects of the tax are analyzed and calculated, as are the optimal second-best taxes for a locality. |
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