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The effects of tax incentives for small firms on employment levels

  • Corseuil, Carlos Henrique L.
  • Moura, Rodrigo Leandro de
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    This paper will examine the effects of tax incentives for small businesses on employment level evaluating a program with this purpose implemented in Brazil in the 1990s. We first develop a theoretical framework which guides both the de nition of the parameters of interest and their identi cation. Selection problems both into the treatment group and into the data sample are tackled by combining fi xed effects methods and regression discontinuity design on alternative sub-samples of a longitudinal database of manufacturing fi rms. The results show that on the one hand the size composition of the treated fi rms may be changed due to the survival of some smaller fi rms that would have exited had it not been eligible to the program. On the other hand, the treated fi rms who do not depend on the program to survive do employ more workers.

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    File URL: http://bibliotecadigital.fgv.br/dspace/bitstream/10438/4185/4/EmploymentEffectsofTaxIncentives.pdf
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    Paper provided by FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil) in its series Economics Working Papers (Ensaios Economicos da EPGE) with number 701.

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    Date of creation: 22 Feb 2010
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    Handle: RePEc:fgv:epgewp:701
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    1. Imbens, Guido W. & Lemieux, Thomas, 2008. "Regression discontinuity designs: A guide to practice," Journal of Econometrics, Elsevier, vol. 142(2), pages 615-635, February.
    2. Fajnzylber, Pablo & Maloney, William F. & Montes-Rojas, Gabriel V., 2009. "Does Formality Improve Micro-Firm Performance? Quasi-Experimental Evidence from the Brazilian SIMPLES Program," IZA Discussion Papers 4531, Institute for the Study of Labor (IZA).
    3. Eric J. Bartelsman & Mark Doms, 2000. "Understanding productivity: lessons from longitudinal microdata," Finance and Economics Discussion Series 2000-19, Board of Governors of the Federal Reserve System (U.S.).
    4. Ruud de Mooij & S. Ederveen, 2001. "Taxation and foreign direct investment; a synthesis of empirical research," CPB Discussion Paper 3, CPB Netherlands Bureau for Economic Policy Analysis.
    5. Giuseppe Moscarini & Fabien Postel-Vinay, 2009. "The Timing of Labor Market Expansions: New Facts and a New Hypothesis," NBER Chapters, in: NBER Macroeconomics Annual 2008, Volume 23, pages 1-51 National Bureau of Economic Research, Inc.
    6. Pakes, Ariel & Ericson, Richard, 1998. "Empirical Implications of Alternative Models of Firm Dynamics," Journal of Economic Theory, Elsevier, vol. 79(1), pages 1-45, March.
    7. Alexander Klemm & Stefan van Parys, 2009. "Empirical Evidenceon the Effects of Tax Incentives," IMF Working Papers 09/136, International Monetary Fund.
    8. Wilbert van der Klaauw, 2008. "Regression-Discontinuity Analysis: A Survey of Recent Developments in Economics," LABOUR, CEIS, vol. 22(2), pages 219-245, 06.
    9. Steven J. Davis & John C. Haltiwanger & Scott Schuh, 1998. "Job Creation and Destruction," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262540932, June.
    10. Lopez-Acevedo , Gladys & Tinajero, Monica, 2010. "Mexico : impact evaluation of sme programs using panel firm data," Policy Research Working Paper Series 5186, The World Bank.
    11. David Neumark & Brandon Wall & Junfu Zhang, 2008. "Do Small Businesses Create More Jobs? New Evidence from the National Establishment Time Series," NBER Working Papers 13818, National Bureau of Economic Research, Inc.
    12. Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-70, May.
    13. Hassett, Kevin A. & Hubbard, R. Glenn, 2002. "Tax policy and business investment," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 3, chapter 20, pages 1293-1343 Elsevier.
    14. Richard E. Caves, 1998. "Industrial Organization and New Findings on the Turnover and Mobility of Firms," Journal of Economic Literature, American Economic Association, vol. 36(4), pages 1947-1982, December.
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