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Factors allocation and local tax

The 2010 reform of the local business tax in France has greatly reduced the local heteregoneity of tax rates for firms. Economic theory suggests that such a change should lead to a reallocation of production factors between sectors, firms and even establishments of the same firm. The objective of this study is to combine a reduced-form analysis at the firm and commuting zone-level with a model of firm dynamics in order to quantify the aggregate productivity gains generated by the reform, and to identify the contribution of the misallocation channel (decline in the dispersion of the marginal return to factors of production).