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Corporate taxes and high-quality entrepreneurship: evidence from a tax reform

Author

Listed:
  • Ana Venâncio
  • Victor Barros
  • Clara Raposo

Abstract

We examine the impact of corporate taxation on entrepreneurship, using a quasi-natural experiment, which substantially reduced the corporate tax rate for start-ups located in inland municipalities in Portugal. The combination of a high quality and universal firm level database for Portugal allows the detailed study of firm's behaviour. We use BPlim’s harmonized Central Balance Sheet panel for the period of 2006 to 2015 to evaluate the different behaviour of exporters and non-exporters in Portugal. We follow on the self-selection and learning-by-exporting literature, estimating several exporter productivity premiums. After finding solid evidence of a productivity advantage of exporters compared to non-exporters, which seems to emerge several years before firms start to export, we expand our study in order to explore the causality of the previous findings. Thus, we estimate a logit fixed effects model to assess the impact of several variables in the export propensity of a firm. We corroborate the self-selection theory, given the significance of labour productivity in probability of a firm exporting, as well, as significant effects of firm absolute size, relative market share, sector concentration and investment.

Suggested Citation

  • Ana Venâncio & Victor Barros & Clara Raposo, 2020. "Corporate taxes and high-quality entrepreneurship: evidence from a tax reform," GEE Papers 0140, Gabinete de Estratégia e Estudos, Ministério da Economia, revised Jan 2020.
  • Handle: RePEc:mde:wpaper:0140
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    File URL: http://www.gee.gov.pt//RePEc/WorkingPapers/GEE_PAPERS_140.pdf
    File Function: First version, 2020
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    More about this item

    Keywords

    Firm entry; Job creation; Tax policy; Corporate taxes; High-quality entrepreneurship;
    All these keywords.

    JEL classification:

    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies

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