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Drivers of New Business Creation in the OECD : the Role of Education and Taxation

Author

Listed:
  • António Afonso
  • M. Carmen Blanco-Arana
  • Ana J. Cisneros-Ruiz

Abstract

The main aim of this paper is to empirically assess the impact of education and tax revenue on fostering new business creation in the OECD countries. To this end, we employ fixed effects and random effects models using panel data from 2006 to 2022, incorporating alternative conditions. Results confirm that while education and the economic situation are key pillars in fostering new business creation, the role of tax revenue in supporting economic development – and, by extension, new business formation – is fundamental, even if non-linear, with a threshold of 30% of GDP. Tax revenue collected by governments provides essential funding for public goods and services such as infrastructure, education, and innovation support programs, all of which contribute to creating an environment where new businesses can emerge and thrive. Our findings remain robust under the GMM estimation.

Suggested Citation

  • António Afonso & M. Carmen Blanco-Arana & Ana J. Cisneros-Ruiz, 2025. "Drivers of New Business Creation in the OECD : the Role of Education and Taxation," Working Papers REM 2025/0395, ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa.
    • Handle: RePEc:ise:remwps:wp03952025
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    Keywords

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    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • I2 - Health, Education, and Welfare - - Education
    • M20 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - General

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