Abstract
In order to allocate resources and formulate policies effectively, governments and enterprises often need accurate geographical information on profit-seeking enterprises. This study explores the impact of local fiscal expenditure and environmental regulation on the number of profit-seeking enterprises in Taiwan’s counties and cities from the perspective of spatial econometrics, and analyzes data from 2001 to 2019. After comparing the explanatory power differences of various spatial econometric models, the spatial Durbin model, with spatial and time fixed effects, was used to explore the direct effect on the number of local profit-seeking enterprises, and the spillover effect of the number of local profit-seeking enterprises in different geographical locations on neighboring regions, especially the spatial spillover effect of local fiscal expenditure and labor and environmental regulations. This paper discusses the decision-making choices of local government regarding the competition strategy of environmental regulation, and finally provides the policy implications for the government as a reference.
Highlights
The establishment of a profit-seeking enterprise can affect the economic development of the place where the enterprise is located
Feedback effects indicate that the change to the independent variables in this region causes the change to the dependent variables in neighboring regions, which in turn causes the change to the dependent variables in this region
In terms of numerical values, the direct effect is equal to the sum of the β regression coefficient and the feedback effect of the spatial Durbin model (SDM)
Summary
The establishment of a profit-seeking enterprise can affect the economic development of the place where the enterprise is located. The “vote by feet” theory revises the traditional notion that public finance leads to market failure and introduces the spatial concept into the financial theory In this view, population mobility is affected by public expenditure, and by the burden of rents and taxes. As a reflection of local fiscal capacity, local fiscal expenditure has a direct or indirect impact on the endowment and flow of production factors, such as labor, capital, technology, and information, and has an important external effect on the operating environment of enterprises. This will naturally affect the growth in the number of profit-seeking enterprises
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