Tax Policy, Location Choices and Market Structure

G.A. Pfann; H.L. van Kranenburg

doi:10.1086/343780

Tax Policy, Location Choices and Market Structure

G.A. Pfann^*, H.L. van Kranenburg

^*Corresponding author for this work

Organisation,Strategy & Entrepreneurship

Research output: Contribution to journal › Article › Academic › peer-review

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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.

Original language	English
Pages (from-to)	61-83
Journal	Journal of Law & Economics
Volume	46
DOIs	https://doi.org/10.1086/343780
Publication status	Published - 1 Jan 2003

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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.",

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