Distributional effects of the fiscal impact of power plant siting

Classical economic base analysis is grounded in the concept that export activity drives the local economy and that economic impacts due to development can be traced to changes in the export base. Local government activities are frequently treated as a consequence of economic change, but no significant economic impact has been associated with imported tax dollars. In this paper the siting of a power reactor is examined, and it is concluded that the major economic impact related to the siting may result from increases in the tax base, which permit either increased public expenditure or increased disposable income through tax rate decreases. It is argued that as the fraction of the tax base that is owned nonlocally increases, the community perceives a price change, since smaller amounts of local income must be foregone to purchase a constant level of public services. This relationship is estimated using a sample of rural counties drawn from the State of Tennessee. The empirical results generally support the importance of the price variable in determining discretionary expenditures out of local disposable incomes. This finding conforms to other results obtained through an examination of actual reactor sitings, and points to the importance of understanding community responses to increased tax base for understanding local economic impacts from reactor siting