In this article, a triangular production-location model is used to show that when
output price is random, the imposition of business taxes (including lump-sum tax,
profit tax, output tax, and input tax) can have significant effects on the optimal
location and output of a firm attempting to maximize a von Neumann-Morgenstern
utility function of profits. In addition, using the concept of differential incidence, the
authors also made a comparison of the magnitudes of the impacts of these taxes on
the output and location of the firm and indicates that the effects of these taxes differ
according to the tax structure.
Get full access to this article
View all access options for this article.
References
1.
Alperovich, G., and E. Katz.1983. Transport rate uncertainty and the optimal location of the firm. Journal of Regional Science23:389-96.
2.
Due, J.F.1961. Studies of state-location tax influences on location of industry. National Tax Journal14:163-73.
3.
Eswaran, M., Y. Kanemoto, and D. Ryan.1981. A dual approach to the locational decision of the firm. Journal of Regional Science21:469-90.
4.
Hanoch, G.1975. The elasticity of scale and the shape of average costs . American Economic Review65:492-7.
5.
Hsu, S.K., and C.C. Mai.1984. Production location and random input price. Regional Science and Urban Economics14:45-62.
6.
Hurter, A.P., and J.S. Martinich.1989. Facility location and the theory of production. Boston: Kluwer.
7.
Hwang, H., and C.C. Mai.1987. Business taxation and industrial location . Rivista Internazionale di Scienze Economiche e Commerciali34:241-8.
8.
Katz, E.1984. The optimal location of the competitive firm under price uncertainty. Journal of Urban Economics16:64-75.
9.
Khalili, A., V.K. Mathur, and D. Bodenhorn.1974. Location and the theory of production: A generalization. Journal of Economic Theory9:467-75.
10.
Mai, C.C.1981. Optimal location and the theory of the firm under demand uncertainty. Regional Science and Urban Economics11:549-57.
11.
—. 1984. Location and the theory of the imperfectly competitive firm under demand uncertainty. Southern Economic Journal50:1160-70.
12.
Martinich, J.S., and A.P. Hurter.1982. Price uncertainty and the optimal production-location decision. Regional Science and Urban Economics12:509-28.
13.
—. 1985a. Input price uncertainty and the production-location decision: A critique and synthesis. Regional Science and Urban Economics15:591-6.
14.
—. 1985b. Price uncertainty, factor substitution and the location bias of business taxes. Journal of Regional Science25:175-90.
15.
—. 1987. A note on income taxes and degree one production homogeneity . Journal of Regional Science27:477-82.
16.
Mathur, V.K.1983. Location theory of the firm under price uncertainty. Regional Science and Urban Economics13:411-28.
17.
—. 1985. Location theory of the firm under price uncertainty: Some new conclusions. Regional Science and Urban Economics15:597-8.
18.
Miller, S.M., and D.M. Jensen.1978. Location and the Theory of Production: A Review, Summary and Critique of Recent Contributions. Regional Science and Urban Economics.8:117-128.
19.
Musgrave, R.A.1959. The theory of public finance. New York : McGraw-Hill.
20.
Oakland, W.H.1978. Local taxes and intraurban industrial location: A survey . In Metropolitan financing and growth management policies , edited by G. F. Break.Madison: University of Wisconsin Press.
21.
Park, K., and V.K. Mathur.1988. Production technology uncertainty and the optimal location of the firm. Journal of Regional Science28:51-64.
22.
—. 1990. Location theory under uncertainty without and with taxes: A generalization. Journal of Urban Economics27:362-80.
23.
Sandmo, A.1971. On the theory of the competitive firm under price uncertainty . American Economic Review61:65-73.
24.
Silberberg, E.1978. The structure of economics: A mathematical analysis. New York: McGraw-Hill.
25.
Truett, D., and B. Roberts.1973. Classical production functions, technical optimality, and scale adjustments of the firm. American Economic Review63:975-82.
