IT IS the heart of the world’s entertainment industry, the town where you can barely turn a corner without tripping over a film crew and where residents rent out everything from their backyards to their bathrooms to location scouts.

Now, however, a spat between two of California’s biggest money earners — entertainment and aviation — has thrown the spotlight on to the flight of movie-makers to other states and countries, lured by generous tax incentives.

Angelenos have grown used to the disruption caused by filming. But when the producers of Bruce Willis’s fourth Die Hard movie asked to shut down key freeways leading to Los Angeles international airport for 12 days in the autumn, aviation officials revolted.

In a letter to Film LA, which issues filming permits to studios, a senior airport official said that the closures for Live Free or Die Hard could seriously disrupt business. Air cargo companies are particularly upset, saying that filming could cost them millions in delayed deliveries and threatening to send their business to other airports if it goes ahead during the busy pre-Christmas period.

Entertainment business advocates are concerned that the dispute is becoming a test case of how willing the city is to accommodate an industry that put it on the map but which is increasingly taking its business elsewhere. Movie production in California has dived in recent years, threatening Los Angeles’s position as America’s movie-making capital.

From 2003 to 2005, almost a quarter of all American-made feature films were shot entirely in California. This year the projections are for 11 per cent. The number of films and television pilots filmed in Los Angeles city have also plummeted this year, by 6 per cent and 23 per cent respectively.

The beneficiaries have included places such as New York City and Canada, which lure film-makers with tax incentives. Europe is also getting in on the act: Tessa Jowell, the British Culture Secretary, visited Los Angeles this year to advertise generous tax breaks.

Twenty-five American states also offer such breaks. They include Maryland — where Willis brought traffic to a standstill with a staged car crash last week — but not California.

Industry advocates have cautioned that the flight from California will continue if authorities do not try to protect the industry with tax incentives. Entertainment is the second-largest employment sector in Los Angeles County, generating 250,000 jobs directly and more than $30billion (£16 billion) a year in revenue for the local economy. The drop in LA-based television pilot shows alone is estimated to have cost more than 1,000 jobs and drained as much as $70 million from the county’s economy.

“We can no longer think that these jobs are going to stay here just because this is Hollywood,” Antonio Villaraigosa, the Mayor of Los Angeles, said this year. “We’ve got to be aggressive at trying to keep them here.”

With Arnold Schwarzenegger, a Hollywood icon, as state governor it would seem an easy enough agenda to push. But up in the small-town state capital of Sacramento, legislators are unmoved by Hollywood glitz.

A Bill to put California on a more equal tax footing with its rivals failed in the state assembly last year and a new push this summer, backed by Mr Schwarzenegger, also failed when it ran into strong political opposition.

The feeling is that the entertainment business is a super-rich industry that should not need handouts.

Industry advocates say that this view is unfair and that high-earning stars such as Willis are the exception, while thousands of technicians, caterers and studio drivers work for more modest pay packets.

The first Die Hard was shot at Twentieth Century Fox’s headquarters in Los Angeles and in the second, Die Harder, the airport masqueraded as Washington’s Dulles — night-time filming precluded the need for a closedown. Most of the third, though, was filmed on the movie-friendly streets of New York.

The producers of Live Free or Die Hard have promised to co-operate as much as they can with the aviation industry as they film Willis’s latest attempt to save the world — this time against internet terrorists.

“We’re all really excited to be making a big movie in Los Angeles,” Fox said.