Industry chasing and the tax effect: a question of approach

Abstract

This paper employs a sample selection model to analyse the effects of a location's tax climate on manufacturing activity from 1974–1994. Results reveal the ‘tax effect’ varies substantially across industry and is significant in half of the industries analysed-chemical and allieds and food and kindreds. These results reinforce the lack of a robust consensus regarding this issue and highlight the importance of disaggregating industry.