Corporate taxation and the size of new firms: Evidence from Europe
AbstractUsing 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, which are robust to changes in several assumptions, suggest that a one-unit reduction in the effective corporate income tax rate leads to a reduction of entrants' capital size that ranges from 2.7% to 14.4%. Results on labor size are more mixed in terms of both sign and size. These findings imply that a reduction in corporate taxation reduces the capital to labor ratio. (JEL: C23, H32, L26, L51, M13) (c) 2010 by the European Economic Association.
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Bibliographic InfoPaper provided by Tilburg University in its series Open Access publications from Tilburg University with number urn:nbn:nl:ui:12-3607199.
Date of creation: 2010
Date of revision:
Publication status: Published in Journal of the European Economic Association (2010) v.8, p.606-616
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Other versions of this item:
- Marco Da Rin & Marina Di Giacomo & Alessandro Sembenelli, 2010. "Corporate Taxation and the Size of New Firms: Evidence from Europe," Journal of the European Economic Association, MIT Press, vol. 8(2-3), pages 606-616, 04-05.
- Da Rin, M. & Di Giacomo, M. & Sembenelli, A., 2009. "Corporate Taxation and the Size of New Firms: Evidence From Europe," Discussion Paper 2009-72, Tilburg University, Center for Economic Research.
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
- H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
- L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
- M13 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - New Firms; Startups
This paper has been announced in the following NEP Reports:
- NEP-ACC-2010-06-18 (Accounting & Auditing)
- NEP-ALL-2010-06-18 (All new papers)
- NEP-EEC-2010-06-18 (European Economics)
- NEP-EUR-2010-06-18 (Microeconomic European Issues)
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