IDEAS home Printed from https://ideas.repec.org/p/mde/wpaper/0137.html
   My bibliography  Save this paper

Collateral Value and Entrepreneurship: Evidence from a Property Tax Reform

Author

Listed:
  • Miguel Ferreira
  • João Pereira dos Santos
  • Ana Venâncio

Abstract

We study the role of property taxes on entrepreneurial activity using a quasi-natural experiment, which unexpectedly reduced the upper bound of the Portuguese property tax rate for urban properties in 2008. Using a difference-in-differences approach, we find that treated municipalities (i.e., municipalities that had a property tax rate above the new upper bound) experienced higher entry rates in the manufacturing sector vis-à-vis control municipalities (i.e., municipalities that had a property tax rate at or below the new upper bound). Taking advantage of firm-level data, we show that start-ups created as a response to the decrease in property taxes in treated municipalities use more debt, invest more, and are more likely to survive.

Suggested Citation

  • Miguel Ferreira & João Pereira dos Santos & Ana Venâncio, 2019. "Collateral Value and Entrepreneurship: Evidence from a Property Tax Reform," GEE Papers 0137, Gabinete de Estratégia e Estudos, Ministério da Economia, revised Dec 2019.
    • Handle: RePEc:mde:wpaper:0137
    as

    Download full text from publisher

    File URL: https://www.gee.gov.pt//RePEc/WorkingPapers/GEE_PAPERS_137.pdf
    File Function: First version, 2019
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Susana Peralta & João Pereira dos Santos, 2020. "Who seeks reelection: local fiscal restraints and political selection," Public Choice, Springer, vol. 184(1), pages 105-134, July.
    2. Paul Davidson Reynolds, 2007. "Entrepreneurship in The United States," International Studies in Entrepreneurship, Springer, number 978-0-387-45671-3, December.
    3. Gilles Duranton & Laurent Gobillon & Henry G. Overman, 2011. "Assessing the Effects of Local Taxation using Microgeographic Data," Economic Journal, Royal Economic Society, vol. 121(555), pages 1017-1046, September.
    4. de Meza, David & Webb, David, 1999. "Wealth, Enterprise and Credit Policy," Economic Journal, Royal Economic Society, vol. 109(455), pages 153-163, April.
    5. Erik Hurst & Benjamin Wild Pugsley, 2011. "What Do Small Businesses Do?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 42(2 (Fall)), pages 73-142.
    6. Holtz-Eakin, Douglas & Joulfaian, David & Rosen, Harvey S, 1994. "Sticking It Out: Entrepreneurial Survival and Liquidity Constraints," Journal of Political Economy, University of Chicago Press, vol. 102(1), pages 53-75, February.
    7. Evans, David S & Jovanovic, Boyan, 1989. "An Estimated Model of Entrepreneurial Choice under Liquidity Constraints," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 808-827, August.
    8. Blanchflower, David G & Oswald, Andrew J, 1998. "What Makes an Entrepreneur?," Journal of Labor Economics, University of Chicago Press, vol. 16(1), pages 26-60, January.
    9. Robert W. Fairlie & Harry A. Krashinsky, 2012. "Liquidity Constraints, Household Wealth, And Entrepreneurship Revisited," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 58(2), pages 279-306, June.
    10. Cressy, Robert, 1996. "Are Business Startups Debt-Rationed?," Economic Journal, Royal Economic Society, vol. 106(438), pages 1253-1270, September.
    11. Burke, Andrew E & FitzRoy, Felix R & Nolan, Michael A, 2000. "When Less Is More: Distinguishing between Entrepreneurial Choice and Performance," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 62(5), pages 565-587, December.
    12. Phillip Kim & Howard Aldrich & Lisa Keister, 2006. "Access (Not) Denied: The Impact of Financial, Human, and Cultural Capital on Entrepreneurial Entryin the United States," Small Business Economics, Springer, vol. 27(1), pages 5-22, August.
    13. repec:hal:spmain:info:hdl:2441/1nfkh9tn2m87ko6gb634e2ufgl is not listed on IDEAS
    14. Joshua D. Angrist & Jörn-Steffen Pischke, 2009. "Mostly Harmless Econometrics: An Empiricist's Companion," Economics Books, Princeton University Press, edition 1, number 8769.
    15. Brett Anitra Gilbert & David B. Audretsch & Patricia P. McDougall, 2004. "The Emergence of Entrepreneurship Policy," Small Business Economics, Springer, vol. 22(3_4), pages 313-323, April.
    16. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2004. "How Much Should We Trust Differences-In-Differences Estimates?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 119(1), pages 249-275.
    17. Jenny Nykvist, 2008. "Entrepreneurship and Liquidity Constraints: Evidence from Sweden," Scandinavian Journal of Economics, Wiley Blackwell, vol. 110(1), pages 23-43, March.
    18. Andrew E. Burke & Felix R. FitzRoy & Michael A. Nolan, 2000. "When Less is More: Distinguishing Between Entrepreneurial Choice and Performance," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 62(5), pages 565-587, December.
    19. Jörn Block, 2021. "Corporate income taxes and entrepreneurship," IZA World of Labor, Institute of Labor Economics (IZA), pages 257-257, July.
    20. Audretsch, David B. & Dohse, Dirk & dos Santos, João Pereira, 2017. "Do toll-free highways foster firm formation and employment growth? Results from a quasi-natural experiment," Kiel Working Papers 2080, Kiel Institute for the World Economy (IfW Kiel).
    21. Rui Baptista & Joana Mendonça, 2010. "Proximity to knowledge sources and the location of knowledge-based start-ups," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 45(1), pages 5-29, August.
    22. Dunn, Thomas & Holtz-Eakin, Douglas, 2000. "Financial Capital, Human Capital, and the Transition to Self-Employment: Evidence from Intergenerational Links," Journal of Labor Economics, University of Chicago Press, vol. 18(2), pages 282-305, April.
    23. Lindh, Thomas & Ohlsson, Henry, 1996. "Self-Employment and Windfall Gains: Evidence from the Swedish Lottery," Economic Journal, Royal Economic Society, vol. 106(439), pages 1515-1526, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. António Afonso & Ana Venâncio, 2022. "Local Property Tax Reform and Municipality Spending Efficiency," CESifo Working Paper Series 9538, CESifo.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Nadia Simoes & Nuno Crespo & Sandrina B. Moreira, 2016. "Individual Determinants Of Self-Employment Entry: What Do We Really Know?," Journal of Economic Surveys, Wiley Blackwell, vol. 30(4), pages 783-806, September.
    2. Andrew Burke & Felix FitzRoy & Michael Nolan, 2008. "What makes a die-hard entrepreneur? Beyond the ‘employee or entrepreneur’ dichotomy," Small Business Economics, Springer, vol. 31(2), pages 93-115, August.
    3. Paul A. Coomes & Jose Fernandez & Stephan F. Gohmann, 2013. "The Rate of Proprietorship Among Metropolitan Areas: The Impact of the Local Economic Environment and Capital Resources," Entrepreneurship Theory and Practice, , vol. 37(4), pages 745-770, July.
    4. Philippe Bracke & Christian Hilber & Olmo Silva, 2014. "Homeownership and Entrepreneurship: The Role of Mortgage Debt and Commitment," CESifo Working Paper Series 5048, CESifo.
    5. Blanchflower, David G. & Shadforth, Chris, 2007. "Entrepreneurship in the UK," Foundations and Trends(R) in Entrepreneurship, now publishers, vol. 3(4), pages 257-364, July.
    6. Parker, Simon C, 2002. "Do Banks Ration Credit to New Enterprises? And Should Governments Intervene? President's Lecture Delivered at the Annual General Meeting of the Scottish Economic Society 4-5 September 2001," Scottish Journal of Political Economy, Scottish Economic Society, vol. 49(2), pages 162-195, May.
    7. Philippe Bracke & Christian Hilber & Olmo Silva, 2012. "Homeownerhip and Entrepreneurship," SERC Discussion Papers 0103, Centre for Economic Performance, LSE.
    8. Kerr, Sari Pekkala & Kerr, William R. & Nanda, Ramana, 2022. "House prices, home equity and entrepreneurship: Evidence from U.S. census micro data," Journal of Monetary Economics, Elsevier, vol. 130(C), pages 103-119.
    9. José María Millán & Emilio Congregado & Concepción Román, 2010. "Determinants of Self-Employment Dynamics and their Implications on Entrepreneurial Policy Effectiveness," Lecturas de Economía, Universidad de Antioquia, Departamento de Economía, issue 72, pages 45-76.
    10. Bracke, Philippe & Hilber, Christian A.L. & Silva, Olmo, 2018. "Mortgage debt and entrepreneurship," Journal of Urban Economics, Elsevier, vol. 103(C), pages 52-66.
    11. Dongxu Wu & Zhongmin Wu, 2015. "Intergenerational links, gender differences, and determinants of self-employment," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 42(3), pages 400-414, August.
    12. González, Felipe & Marshall, Guillermo & Naidu, Suresh, 2017. "Start-up Nation? Slave Wealth and Entrepreneurship in Civil War Maryland," The Journal of Economic History, Cambridge University Press, vol. 77(2), pages 373-405, June.
    13. Robert W. Fairlie & Alicia M. Robb, 2008. "Race and Entrepreneurial Success: Black-, Asian-, and White-Owned Businesses in the United States," MIT Press Books, The MIT Press, edition 1, volume 1, number 026206281x, December.
    14. Wim Naudé, 2008. "Entrepreneurship in Economic Development," WIDER Working Paper Series RP2008-20, World Institute for Development Economic Research (UNU-WIDER).
    15. Robert W. Fairlie & Javier Miranda, 2017. "Taking the Leap: The Determinants of Entrepreneurs Hiring Their First Employee," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 26(1), pages 3-34, February.
    16. Vladasel, Theodor & Lindquist, Matthew J. & Sol, Joeri & van Praag, Mirjam, 2021. "On the origins of entrepreneurship: Evidence from sibling correlations," Journal of Business Venturing, Elsevier, vol. 36(5).
    17. Marco Caliendo & Frank M Fossen & Alexander S Kritikos, 2022. "Personality characteristics and the decision to hire [Do the unemployed become successful entrepreneurs?]," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 31(3), pages 736-761.
    18. Robert W. Fairlie, 2013. "Minority and immigrant entrepreneurs: access to financial capital," Chapters, in: Amelie F. Constant & Klaus F. Zimmermann (ed.), International Handbook on the Economics of Migration, chapter 8, pages 153-175, Edward Elgar Publishing.
    19. Montgomery, Mark & Johnson, Terry & Faisal, Syed, 2005. "What kind of capital do you need to start a business: financial or human?," The Quarterly Review of Economics and Finance, Elsevier, vol. 45(1), pages 103-122, February.
    20. Sascha G. Walter & Achim Walter, 2009. "Personenbezogene Determinanten von Unternehmensgründungen: Stand der Forschung und Perspektiven des Fortschritts," Schmalenbach Journal of Business Research, Springer, vol. 61(1), pages 57-89, February.

    More about this item

    Keywords

    Entrepreneurship; Property taxes; Savings; Portugal;
    All these keywords.

    JEL classification:

    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mde:wpaper:0137. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joana Almodovar (email available below). General contact details of provider: https://edirc.repec.org/data/geegvpt.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.