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Entrepreneurship and the policy environment

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  • Yannis Georgellis
  • Howard J. Wall

Abstract

This paper uses a spatial panel approach to examine the effect of the government-policy environment on the level of entrepreneurship. Specifically, we investigate whether marginal income tax rates and bankruptcy exemptions influence rates of entrepreneurship. Whereas previous work in the literature finds that both policies are positively related to entrepreneurship, we find non-monotonic relationships: a U-shaped relationship between marginal tax rates and entrepreneurship and an S-shaped relationship between bankruptcy exemptions and entrepreneurship.

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Bibliographic Info

Paper provided by Federal Reserve Bank of St. Louis in its series Working Papers with number 2002-019.

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Date of creation: 2004
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Publication status: Published in Federal Reserve Bank of St. Louis Review, March/April 2006, 88(2), pp. 95-111
Handle: RePEc:fip:fedlwp:2002-019

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Keywords: Business enterprises ; Taxation ; Bankruptcy;

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References

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  1. Le, Anh T, 1999. " Empirical Studies of Self-Employment," Journal of Economic Surveys, Wiley Blackwell, vol. 13(4), pages 381-416, September.
  2. Evans, David S & Leighton, Linda S, 1989. "Some Empirical Aspects of Entrepreneurship," American Economic Review, American Economic Association, vol. 79(3), pages 519-35, June.
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  4. Scott Fay & Erik Hurst & Michelle J. White, 2002. "The Household Bankruptcy Decision," American Economic Review, American Economic Association, vol. 92(3), pages 706-718, June.
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  7. R. Glenn Hubbard & William M. Gentry, 2000. "Tax Policy and Entrepreneurial Entry," American Economic Review, American Economic Association, vol. 90(2), pages 283-287, May.
  8. Thomas Dunn & Douglas Holtz-Eakin, 2000. "Financial Capital, Human Capital, and the Transition to Self-Employment:Evidence from Intergenerational Links," NBER Working Papers 5622, National Bureau of Economic Research, Inc.
  9. Sandra E. Black & Philip E. Strahan, 2002. "Entrepreneurship and Bank Credit Availability," Journal of Finance, American Finance Association, vol. 57(6), pages 2807-2833, December.
  10. Yannis Georgellis & Howard J. Wall, 2000. "Who are the self-employed?," Review, Federal Reserve Bank of St. Louis, issue Nov, pages 15-24.
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  20. Fan, Wei & White, Michelle J, 2003. "Personal Bankruptcy and the Level of Entrepreneurial Activity," Journal of Law and Economics, University of Chicago Press, vol. 46(2), pages 543-67, October.
  21. Howard J. Wall & Yannis Georgellis, 1999. "What makes a region entrepreneurial? evidence from Britain," Working Papers 1999-009, Federal Reserve Bank of St. Louis.
  22. Dye, Ronald A, 1986. "An Economic Analysis of Bankruptcy Statutes," Economic Inquiry, Western Economic Association International, vol. 24(3), pages 417-28, July.
  23. White, M.J., 1998. "Why It Pays to File for Bankruptcy: A Critical Look at Incentives Under U.S. Bankruptcy Laws and A Proposal for Change," Papers 98-02, Michigan - Center for Research on Economic & Social Theory.
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  27. Gill, Andrew M, 1988. "Choice of Employment Status and the Wages of Employees and the Self-employed: Some Further Evidence," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 3(3), pages 229-34, July-Sept.
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Citations

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Cited by:
  1. Aparna Mathur, 2010. "Health insurance and job creation by the self-employed," Small Business Economics, Springer, vol. 35(3), pages 299-317, October.
  2. Howard J. Wall, 2003. "Entrepreneurship and the deregulation of banking: how strong is the evidence?," Working Papers 2002-032, Federal Reserve Bank of St. Louis.
  3. Frank Fossen & Viktor Steiner, 2009. "Income taxes and entrepreneurial choice: empirical evidence from two German natural experiments," Empirical Economics, Springer, vol. 36(3), pages 487-513, June.
  4. Ruud A. De Mooij & Gaëtan J.A. Nicodème, 2006. "Corporate Tax Policy, Entrepreneurship and Incorporation in the EU," CESifo Working Paper Series 1883, CESifo Group Munich.
  5. Akyol, Ahmet & Athreya, Kartik, 2011. "Credit and self-employment," Journal of Economic Dynamics and Control, Elsevier, vol. 35(3), pages 363-385, March.
  6. Da Rin, M. & Di Giacomo, M. & Sembenelli, A., 2008. "Firm Entry Dynamics and Taxation of Corporate Profits: Evidence from Europe (Replaced by DP 2009-61)," Discussion Paper 2008-65, Tilburg University, Center for Economic Research.
  7. Wall, Howard J., 2004. "Entrepreneurship and the deregulation of banking," Economics Letters, Elsevier, vol. 82(3), pages 333-339, March.
  8. Mina Baliamoune-Lutz & Pierre Garello, 2011. "Tax Structure And Entrepreneurship," Post-Print halshs-00706942, HAL.
  9. Kevin Moore, 2004. "The effects of the 1986 and 1993 tax reforms on self-employment," Finance and Economics Discussion Series 2004-05, Board of Governors of the Federal Reserve System (U.S.).
  10. Donald Bruce & John Deskins, 2012. "Can state tax policies be used to promote entrepreneurial activity?," Small Business Economics, Springer, vol. 38(4), pages 375-397, May.
  11. Magnus Henrekson & Tino Sanandaji, 2011. "Entrepreneurship and the theory of taxation," Small Business Economics, Springer, vol. 37(2), pages 167-185, September.
  12. Fossen, Frank M. & Steiner, Viktor, 2006. "Income Taxes and Entrepreneurial Choice: Empirical Evidence from Germany," IZA Discussion Papers 2164, Institute for the Study of Labor (IZA).
  13. Frank M. Fossen, 2007. "Risky Earnings, Taxation and Entrepreneurial Choice: A Microeconometric Model for Germany," Discussion Papers of DIW Berlin 705, DIW Berlin, German Institute for Economic Research.
  14. Jeffrey Thompson, 2012. "Raising Revenue from High-Income Households: Should States Continue to Place the Lowest Tax Rates on Those with the Highest Incomes?," Published Studies revenue_peri_march5, Political Economy Research Institute, University of Massachusetts at Amherst.
  15. Estrin, Saul & Korosteleva, Julia & Mickiewicz, Tomasz, 2013. "Which institutions encourage entrepreneurial growth aspirations?," Journal of Business Venturing, Elsevier, vol. 28(4), pages 564-580.

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