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| Author: | Rin, M. Da Giacomo, M. Di Sembenelli, A. |
| Title: | Entrepreneurship, firm entry and the taxation of corporate income: evidence from Europe |
| Journal: | Journal of Public Economics
2011 : OCT, VOL 95: 9-10, p. 1048-1066 |
| Index terms: | entrepreneurship taxation company taxation Europe panel data entry conditions political economy |
| Freeterms: | incorporation |
| Language: | eng |
| Abstract: | Can tax policy contribute to the creation of new companies? We assemble a novel country-industry level panel database with data on entry for 17 European countries between 1997 and 2004 to give insights to this question. Our analysis is based on recent models of corporate taxation's effect on firms' incorporation decisions. Effective average tax rates are computed and the taxation of corporate income's effect on entry rates are studied in a country-industry level. Utilizing the political economy literature, we account for the possible endogeneity of taxation and find a significant negative effect of corporate income taxation on entry rates. The effect is concave and implies that tax reductions affect entry rates only below a specific threshold tax level. The results are robust to alternative measures of effective taxation and to the utilization of alternative and additional explanatory variables. |
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