"Success Taxes," Entrepreneurial Entry, and Innovation
AbstractInterest in the role of entrepreneurial entry in innovation raises the question of the extent to which tax policy encourages or discourages entry. We find that, while the level of the marginal tax rate has a negative effect in entrepreneurial entry, the progressivity of the tax also discourages entrepreneurship, and significantly so for some groups of households. These effects are principally traceable to the upside' or success' convexity of the household tax schedule. Prospective entrants from a priori innovative industries and occupations are no less affected by the considerations we examine than other prospective entrants. In terms of destination-based industry and occupation measures of innovative entrepreneurs, we find mixed evidence on whether innovative entrepreneurs differ from the general population; the results for entrepreneurs moving to innovative industries suggest that they may be unaffected by tax convexity but the possible endogeneity of this measure of innovative entrepreneurs confounds interpreting this specification. Using education as a measure of potential for innovation, we find that tax convexity discourages entry into self-employment for people of all educational backgrounds. Overall, we find little evidence that the tax effects are focused simply on the employment changes of less skilled or less promising potential entrants.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 10551.
Date of creation: Jun 2004
Date of revision:
Publication status: published as William M. Gentry, R. Glenn Hubbard. ""Success Taxes," Entrepreneurial Entry, and Innovation," in Adam B. Jaffe, Josh Lerner and Scott Stern, editors, "Innovation Policy and the Economy, Volume 5" The MIT Press (2005)
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Web page: http://www.nber.org
More information through EDIRC
Other versions of this item:
- William M. Gentry & R. Glenn Hubbard, 2005. ""Success Taxes," Entrepreneurial Entry, and Innovation," NBER Chapters, in: Innovation Policy and the Economy, Volume 5, pages 87-108 National Bureau of Economic Research, Inc.
- H0 - Public Economics - - General
- O0 - Economic Development, Technological Change, and Growth - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-06-13 (All new papers)
- NEP-ENT-2004-06-13 (Entrepreneurship)
- NEP-INO-2004-06-13 (Innovation)
- NEP-PBE-2004-06-13 (Public Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Blau, David M, 1987. "A Time-Series Analysis of Self-employment in the United State," Journal of Political Economy, University of Chicago Press, vol. 95(3), pages 445-67, June.
- Rosanne Altshuler & Alan J. Auerbach, 1990.
"The Significance of Tax Law Asymmetries: An Empirical Investigation,"
NBER Working Papers
2279, National Bureau of Economic Research, Inc.
- Altshuler, Rosanne & Auerbach, Alan J, 1990. "The Significance of Tax Law Asymmetries: An Empirical Investigation," The Quarterly Journal of Economics, MIT Press, vol. 105(1), pages 61-86, February.
- Graham, John R., 1996. "Proxies for the corporate marginal tax rate," Journal of Financial Economics, Elsevier, vol. 42(2), pages 187-221, October.
- Bruce, Donald, 2000. "Effects of the United States tax system on transitions into self-employment," Labour Economics, Elsevier, vol. 7(5), pages 545-574, September.
- Herb J. Schuetze, .
"Taxes, Economic Conditions And Recent Trends in Male Self-Employment: A Canada-U.S. Comparison,"
Canadian International Labour Network Working Papers
11, McMaster University.
- Schuetze, Herb J., 2000. "Taxes, economic conditions and recent trends in male self-employment: a Canada-US comparison," Labour Economics, Elsevier, vol. 7(5), pages 507-544, September.
- James M. Poterba, 1989.
"Venture Capital and Capital Gains Taxation,"
NBER Working Papers
2832, National Bureau of Economic Research, Inc.
- Robert Carroll & Douglas Holtz-Eakin & Mark Rider & Harvey S. Rosen, 1998. "Entrepreneurs, Income Taxes, and Investment," NBER Working Papers 6374, National Bureau of Economic Research, Inc.
- Daniel Feenberg & Elisabeth Coutts, 1993. "An introduction to the TAXSIM model," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 12(1), pages 189-194.
- Gruber, Jon & Saez, Emmanuel, 2002.
"The elasticity of taxable income: evidence and implications,"
Journal of Public Economics,
Elsevier, vol. 84(1), pages 1-32, April.
- Jon Gruber & Emmanuel Saez, 2000. "The Elasticity of Taxable Income: Evidence and Implications," NBER Working Papers 7512, National Bureau of Economic Research, Inc.
- Guenther, David A. & Willenborg, Michael, 1999. "Capital gains tax rates and the cost of capital for small business: evidence from the IPO market," Journal of Financial Economics, Elsevier, vol. 53(3), pages 385-408, September.
- Hall, Bronwyn & Van Reenen, John, 2000. "How effective are fiscal incentives for R&D? A review of the evidence," Research Policy, Elsevier, vol. 29(4-5), pages 449-469, April.
- Roger H. Gordon & Julie Berry Cullen, 2002. "Taxes and Entrepreneurial Activity: Theory and Evidence for the U.S," NBER Working Papers 9015, National Bureau of Economic Research, Inc.
- Quadrini, Vincenzo, 1999. "The Importance of Entrepreneurship for Wealth Concentration and Mobility," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 45(1), pages 1-19, March.
- 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.
- Ruud A. de Mooij & GaÃ«tan NicodÃ¨me, 2007. "Corporate tax policy, entrepreneurship and incorporation in the EU," European Economy - Economic Papers 269, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
- Ruud A. de Mooij & Gaetan Nicodeme, 2007. "Corporate Tax Policy, Entrepreneurship and Incorporation in the EU," Tinbergen Institute Discussion Papers 07-030/3, Tinbergen Institute.
- William Gale & Peter Orszag, 2005. "Economic Effects of Making the 2001 and 2003 Tax Cuts Permanent," International Tax and Public Finance, Springer, vol. 12(2), pages 193-232, March.
- Zoltan Acs & Laszlo Szerb, 2007. "Entrepreneurship, Economic Growth and Public Policy," Small Business Economics, Springer, vol. 28(2), pages 109-122, March.
- Åsa Hansson, 2012. "Tax policy and entrepreneurship: empirical evidence from Sweden," Small Business Economics, Springer, vol. 38(4), pages 495-513, May.
- Fossen, Frank M., 2012.
"Risk attitudes and private business equity,"
2012/11, Free University Berlin, School of Business & Economics.
- Andreas Haufler & Pehr-Johan Norbaeck & Lars Persson, 2011.
"Entrepreneurial innovations and taxation,"
1122, Oxford University Centre for Business Taxation.
- Haufler, Andreas & Norbäck, Pehr-Johan & Persson, Lars, 2012. "Entrepreneurial Innovations and Taxation," Working Paper Series 896, Research Institute of Industrial Economics.
- Andreas Haufler & Pehr-Johan Norbäck & Lars Persson, 2011. "Entrepreneurial Innovations and Taxation," CESifo Working Paper Series 3473, CESifo Group Munich.
- Haufler, Andreas & Norbäck, Pehr-Johan & Persson, Lars, 2011. "Entrepreneurial innovations and taxation," Discussion Papers in Economics 12245, University of Munich, Department of Economics.
- Haufler, Andreas & Norbäck, Pehr-Johan & Persson, Lars, 2012. "Entrepreneurial innovations and taxation," CEPR Discussion Papers 9157, C.E.P.R. Discussion Papers.
- Mina Baliamoune-Lutz & Pierre Garello, 2011.
"Tax Structure And Entrepreneurship,"
- Ajay K. Agrawal & Iain M. Cockburn & Alberto Galasso & Alexander Oettl, 2012. "Why are Some Regions More Innovative than Others? The Role of Firm Size Diversity," NBER Working Papers 17793, National Bureau of Economic Research, Inc.
- Georgarakos, Dimitris & Tatsiramos, Konstantinos, 2009.
"Entrepreneurship and survival dynamics of immigrants to the U.S. and their descendants,"
Elsevier, vol. 16(2), pages 161-170, April.
- Georgarakos, Dimitris & Tatsiramos, Konstantinos, 2007. "Entrepreneurship and Survival Dynamics of Immigrants to the U.S. and their Descendants," IZA Discussion Papers 2792, Institute for the Study of Labor (IZA).
- Hansson, Åsa, 2009. "Are small business owners more successful in avoiding taxes: Evidence from Sweden," Working Papers 2009:6, Lund University, Department of Economics.
- repec:dgr:uvatin:2007030 is not listed on IDEAS
- Cullen, Julie Berry & Gordon, Roger H., 2007. "Taxes and entrepreneurial risk-taking: Theory and evidence for the U.S," Journal of Public Economics, Elsevier, vol. 91(7-8), pages 1479-1505, August.
- Julie Berry Cullen & Roger Gordon, 2006. "Tax Reform and Entrepreneurial Activity," NBER Chapters, in: Tax Policy and the Economy, Volume 20, pages 41-72 National Bureau of Economic Research, Inc.
- Bacher, Hans Ulrich & Brülhart, Marius, 2010.
"Progressive Taxes and Firm Births,"
CEPR Discussion Papers
7830, C.E.P.R. Discussion Papers.
- Iris Claus, 2006. "Taxation And Finance Constrained Firms," CAMA Working Papers 2006-20, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.