Tax Policy, Location Choices, and Market Structure

Pfann, Gerard A.; van Kranenburg, Hans

doi:10.2139/ssrn.315010

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Tax Policy, Location Choices, and Market Structure

37 Pages Posted: 26 Jun 2002

See all articles by Gerard A. Pfann

Gerard A. Pfann

Maastricht University; Centre for Economic Policy Research (CEPR); Institute for the Study of Labor (IZA)

Hans van Kranenburg

Radboud University Nijmegen - Nijmegen School of Management

There are 2 versions of this paper

Date Written: May 2002

Abstract

A structural model of entry and fiscal policy is presented. It shows that taxation of variable production costs can increase product prices, lower competition, and reduce the availability of new products in small markets. The model's test is based on a unique nationwide fiscal experiment. We study the effects of the 1869 stamped paper tax reform act on the market for daily newspapers in the Netherlands. The econometric analysis uses data on when and where the newspapers existed and were introduced together with demographic census data from 1859 and 1869. The results confirm the model's predictions and show how taxation affects strategic business location decisions.

Keywords: Quasi-experiment, Industrial Organization, Fiscal Policy, Cities

JEL Classification: C41, D43, L13, L16, L82

Suggested Citation: Suggested Citation

Pfann, Gerard Antonie and van Kranenburg, Hans, Tax Policy, Location Choices, and Market Structure (May 2002). Available at SSRN: https://ssrn.com/abstract=315010 or http://dx.doi.org/10.2139/ssrn.315010