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Employment effects of local taxation

Heinrich Heine University Düsseldorf - DÜSSELDORF - 2018

In our project, we aim at contributing to the literature by exploiting the specific institutional set-up of local taxation in France, where municipalities annually decide upon local tax rates on firms’ capital stock and asset holdings. Combining information on these local tax rates with plant and firm-level data, we aim at investigating potential effects of corporate taxation (CT) on firms’ location choice and employment behavior across space. Here, we are particularly interested in investigating potential shifts in employment across plants within one firm, as well as firms’ decision to fully relocate their business in response to tax changes. We will estimate event study models (as well as generalized difference-in-differences models) that allow us to investigate the effects of CT on our outcomes of interest, while being able to flexibly control for other common local shocks (through the inclusion of local controls) and explicitly investigating the presence of reverse causality by inspecting pre-trends.