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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
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    File URL: http://www.gee.gov.pt//RePEc/WorkingPapers/GEE_PAPERS_137.pdf
    File Function: First version, 2019
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