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The Role of Corporate Taxes in the Decline of the Startup Rate

Author

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  • Julian Neira

    (University of Exeter)

  • Rish Singhania

    (University of Exeter)

Abstract

The Role of Corporate Taxes in the Decline of theStartup Rate∗Julian NeiraUniversity of ExeterRish SinghaniaUniversity of ExeterOctober 26, 2017AbstractThe business startup rate in the United States has exhibited a large secular declinein recent decades. The reasons behind the decline are not well understood. This paperhypothesizes that the startup rate declined in large part because corporate taxes raisedthe opportunity cost of entrepreneurship. We formalize this thesis using a model ofoccupational choice that features firm entry and exit. Quantitatively, the model accountsfor much of the decline in the startup rate. Taxes alone account for one-fifth of thedecline. Cross-sectoral patterns in US data support our results.

Suggested Citation

  • Julian Neira & Rish Singhania, 2018. "The Role of Corporate Taxes in the Decline of the Startup Rate," 2018 Meeting Papers 472, Society for Economic Dynamics.
    • Handle: RePEc:red:sed018:472
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    Cited by:

    1. Satyajit Chatterjee & Burcu Eyigungor, 2023. "The Firm Size-Leverage Relationship and Its Implications for Entry and Business Concentration," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 48, pages 132-157, April.
    2. Andrea Colciago & Vivien Lewis & Branka Matyska, 2023. "Corporate taxes, productivity, and business dynamism," Working Papers 780, DNB.
    3. Neira, Julian & Singhania, Rish, 2020. "Quantifying the Effect of Corporate Taxes on the Life Cycle of Firms," MPRA Paper 99359, University Library of Munich, Germany.
    4. Satyajit Chatterjee & Burcu Eyigungor, 2019. "The Firm Size and Leverage Relationship and Its Implications for Entry and Concentration in a Low Interest Rate World," Working Papers 19-18, Federal Reserve Bank of Philadelphia.
    5. Younjun Kim & Peter F. Orazem, 2025. "What increases the urban–rural gap in firm entry rates?," Small Business Economics, Springer, vol. 65(2), pages 1141-1158, August.
    6. Sedlacek, Petr & Sterk, Vincent, 2019. "Reviving american entrepreneurship? tax reform and business dynamism," Journal of Monetary Economics, Elsevier, vol. 105(C), pages 94-108.
    7. Hugo Hopenhayn & Julian Neira & Rish Singhania, 2022. "From Population Growth to Firm Demographics: Implications for Concentration, Entrepreneurship and the Labor Share," Econometrica, Econometric Society, vol. 90(4), pages 1879-1914, July.

    More about this item

    JEL classification:

    • D2 - Microeconomics - - Production and Organizations
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue

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