Title

Do Location-Based Tax Incentives Attract New Business Establishments?

Document Type

Article

Language

eng

Format of Original

23 p.

Publication Date

2011

Publisher

Wiley

Source Publication

Journal of Regional Science

Source ISSN

0022-4146

Abstract

This paper examines how offering tax incentives in a local area affects the entry of new business establishments. We use the federal Empowerment Zone (EZ) program as a natural experiment to test this relationship. Using instrumental variables estimation, we find that the EZ wage tax credit is responsible for attracting about 2.2 new establishments per 1,000 existing establishments, or a total of 20 new establishments in EZ areas. New establishment growth is strongest in the retail (about 40 new establishments) and service (about five new establishments) sectors, and offset by declines or slower growth in other industries.

Comments

Journal of Regional Science, Vol. 51, No. 3 (2011): 427-449. DOI.

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