The Effect of State and Local Taxes on Economic Development: A Meta-Analysis

Abstract

This study evaluates the impact of state and local taxes on economic development by applying meta regression analysis to a survey of the literature by Timothy J. Bartik (1991). The results generally confirm Bartik's conclusion that the effect of taxes is modest across interstate and intermetro areas but much more pronounced within metro areas. Studies neglecting to control for public services and fixed effects will underestimate the tax elasticity. Those measuring growth as aggregate income or investment growth will find a lower tax elasticity. Still, most modeling differences encountered across studies do not affect the estimated tax elasticity.