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Corporate Taxation and the Size of New Firms: Evidence From Europe

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Author Info

  • Da Rin, M.
  • Di Giacomo, M.
  • Sembenelli, A.

    (Tilburg University, Center for Economic Research)

Abstract

Using a novel country-industry level panel database with information on newly incorporated firms in 17 European countries between 1997 and 2004, we study how taxation of corporate income affects the size of entrants at the country-industry level. Our results, that are robust to changes in several assumptions, suggest that a reduction in the effective corporate income tax rate leads to a significant reduction of the capital size of entrants, and to a decrease in their capital-labor ratio.

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Bibliographic Info

Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 2009-72.

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Date of creation: 2009
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Handle: RePEc:dgr:kubcen:200972

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Web page: http://center.uvt.nl

Related research

Keywords: Entrepreneurship. Corporate income taxation. Incorporation. Firm entry. Firm size. Entry regulation. Panel data;

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References

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  1. Michael P. Devereux & Rachel Griffith, 1998. "The Taxation of Discrete Investment Choices," Keele Department of Economics Discussion Papers (1995-2001) 98/08, Department of Economics, Keele University.
  2. Silvia Ardagna & Annamaria Lusardi, 2010. "Heterogeneity in the Effect of Regulation on Entrepreneurship and Entry Size," Journal of the European Economic Association, MIT Press, vol. 8(2-3), pages 594-605, 04-05.
  3. William R. Kerr & Ramana Nanda, 2009. "Financing Constraints and Entrepreneurship," Harvard Business School Working Papers 10-013, Harvard Business School.
  4. William R. Kerr & Ramana Nanda, 2010. "Banking Deregulations, Financing Constraints, and Firm Entry Size," Journal of the European Economic Association, MIT Press, vol. 8(2-3), pages 582-593, 04-05.
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Citations

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Cited by:
  1. Ricjard Kneller & Danny McGowan, . "Tax Policy and Firm Entry and Exit Dynamics: Evidence from OECD Countries," Discussion Papers 12/01, University of Nottingham, School of Economics.
  2. Malevergne, Y. & Saichev, A. & Sornette, D., 2013. "Zipf's law and maximum sustainable growth," Journal of Economic Dynamics and Control, Elsevier, vol. 37(6), pages 1195-1212.
  3. ANT Bozkaya & William R. Kerr, 2009. "Labor Regulations and European Private Equity," Working Papers CEB 09-055.RS, ULB -- Universite Libre de Bruxelles.
  4. Serena Fatica, 2010. "Taxation and the Quality of Institutions: Asymmetric Effects on FDI," Taxation Papers 21, Directorate General Taxation and Customs Union, European Commission.
  5. European Commission, 2011. "Tax Reforms in EU Member States 2011: tax policy challenges for economic growth and fiscal sustainability," Taxation Papers 28, Directorate General Taxation and Customs Union, European Commission.
  6. Peter Huber & Harald Oberhofer & Michael Pfaffermayr, 2014. "Job creation and the intra-distribution dynamics of the firm size distribution," Industrial and Corporate Change, Oxford University Press, vol. 23(1), pages 171-197, February.
  7. Alex Coad & Julian Frankish & Paul Nightingale & Richard G. Roberts & David J. Storey, 2012. "Business Experience and Start-up Size: Buying More Lottery Tickets Next Time Around?," SPRU Working Paper Series 203, SPRU - Science and Technology Policy Research, University of Sussex.
  8. Silvia Ardagna & Annamaria Lusardi, 2009. "Heterogeneity in the effect of regulation on entrepreneurship and entry size," NBER Working Papers 15510, National Bureau of Economic Research, Inc.

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