Location-based tax incentives and entrepreneurial activities: evidence from Western Regional Development Strategy in China

This paper investigates the effect of location-based tax incentives on local economy through attracting entrepreneurial activities in the context of China. We exploit the differentials in the entry of new private firms across counties on the border of China’s Western Regional Development Strategy (WRDS). This strategy introduces an 18% reduction in corporate income tax rates for firms in the western areas in China after 2000 if they belong to...