Small Business Property Tax Reductions and Firm Productivity

Abstract We investigate the productivity spillovers from UK government’s decision to use extensive property tax reductions as a key instrument stimulate innovation in smaller businesses and drive local growth. To capture complex interaction clustering of hierarchical effects, we apply non-parametric Random Effects Expectation Maximisation algorithm that complements more standard econometric estimators, namely matching control for endogeneity functions estimate total factor productivity. These approaches enabled us incorporate various contextual configurations comparing recipients these non-recipients with regard productivity, which has experienced considerably worse performance than its peers since great recession. Contrary policy assumptions business community expectations, show generic reductions, when significant, are mostly associated lower thus have been unsuitably chosen mechanism further how instruments not built causality could be beneficial evaluation.