Firm Entry Dynamics and Taxation of Corporate Profits: Evidence from Europe (Replaced by DP 2009-61)

M. Da Rin, M. Di Giacomo, A. Sembenelli

Research output: Working paperDiscussion paperOther research output

Abstract

Can tax policy foster the creation of new companies? To answer this question, we assemble a novel country-industry level panel database with entry data of European companies between 1997 and 2004. We compute effective tax rates and explore the effect of corporate taxation policy on entry rates at country-industry level. Drawing on the recent political economy literature, we also account for the endogeneity of taxation. We find a significant negative effect of corporate income taxation on entry rates. The effect is concave and suggests that tax reductions affect entry rates only below a certain threshold tax level. We also find that a reduction in corporate tax rates is more effective in countries with better institutional infrastructure. Our results are robust to alternative measures of effective taxation and to the use of alternative and additional explanatory variables.
Original languageEnglish
Place of PublicationTilburg
PublisherFinance
Number of pages45
Volume2008-65
Publication statusPublished - 2008

Publication series

NameCentER Discussion Paper
Volume2008-65

Fingerprint

Firm entry
Taxation
Profit
Industry
Tax
Tax policy
Data base
Endogeneity
Corporate tax rates
Effective tax rates
Corporate income taxation
Corporate taxation
Institutional infrastructure
European companies
Political economy

Keywords

  • Corporate Taxation
  • Political Economy
  • Firm Entry
  • Entry Regulation
  • Panel Data

Cite this

Da Rin, M., Di Giacomo, M., & Sembenelli, A. (2008). Firm Entry Dynamics and Taxation of Corporate Profits: Evidence from Europe (Replaced by DP 2009-61). (CentER Discussion Paper; Vol. 2008-65). Tilburg: Finance.
Da Rin, M. ; Di Giacomo, M. ; Sembenelli, A. / Firm Entry Dynamics and Taxation of Corporate Profits : Evidence from Europe (Replaced by DP 2009-61). Tilburg : Finance, 2008. (CentER Discussion Paper).
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abstract = "Can tax policy foster the creation of new companies? To answer this question, we assemble a novel country-industry level panel database with entry data of European companies between 1997 and 2004. We compute effective tax rates and explore the effect of corporate taxation policy on entry rates at country-industry level. Drawing on the recent political economy literature, we also account for the endogeneity of taxation. We find a significant negative effect of corporate income taxation on entry rates. The effect is concave and suggests that tax reductions affect entry rates only below a certain threshold tax level. We also find that a reduction in corporate tax rates is more effective in countries with better institutional infrastructure. Our results are robust to alternative measures of effective taxation and to the use of alternative and additional explanatory variables.",
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Da Rin, M, Di Giacomo, M & Sembenelli, A 2008 'Firm Entry Dynamics and Taxation of Corporate Profits: Evidence from Europe (Replaced by DP 2009-61)' CentER Discussion Paper, vol. 2008-65, Finance, Tilburg.

Firm Entry Dynamics and Taxation of Corporate Profits : Evidence from Europe (Replaced by DP 2009-61). / Da Rin, M.; Di Giacomo, M.; Sembenelli, A.

Tilburg : Finance, 2008. (CentER Discussion Paper; Vol. 2008-65).

Research output: Working paperDiscussion paperOther research output

TY - UNPB

T1 - Firm Entry Dynamics and Taxation of Corporate Profits

T2 - Evidence from Europe (Replaced by DP 2009-61)

AU - Da Rin, M.

AU - Di Giacomo, M.

AU - Sembenelli, A.

N1 - Replaced by DP 2009-61 Pagination: 45

PY - 2008

Y1 - 2008

N2 - Can tax policy foster the creation of new companies? To answer this question, we assemble a novel country-industry level panel database with entry data of European companies between 1997 and 2004. We compute effective tax rates and explore the effect of corporate taxation policy on entry rates at country-industry level. Drawing on the recent political economy literature, we also account for the endogeneity of taxation. We find a significant negative effect of corporate income taxation on entry rates. The effect is concave and suggests that tax reductions affect entry rates only below a certain threshold tax level. We also find that a reduction in corporate tax rates is more effective in countries with better institutional infrastructure. Our results are robust to alternative measures of effective taxation and to the use of alternative and additional explanatory variables.

AB - Can tax policy foster the creation of new companies? To answer this question, we assemble a novel country-industry level panel database with entry data of European companies between 1997 and 2004. We compute effective tax rates and explore the effect of corporate taxation policy on entry rates at country-industry level. Drawing on the recent political economy literature, we also account for the endogeneity of taxation. We find a significant negative effect of corporate income taxation on entry rates. The effect is concave and suggests that tax reductions affect entry rates only below a certain threshold tax level. We also find that a reduction in corporate tax rates is more effective in countries with better institutional infrastructure. Our results are robust to alternative measures of effective taxation and to the use of alternative and additional explanatory variables.

KW - Corporate Taxation

KW - Political Economy

KW - Firm Entry

KW - Entry Regulation

KW - Panel Data

M3 - Discussion paper

VL - 2008-65

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BT - Firm Entry Dynamics and Taxation of Corporate Profits

PB - Finance

CY - Tilburg

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Da Rin M, Di Giacomo M, Sembenelli A. Firm Entry Dynamics and Taxation of Corporate Profits: Evidence from Europe (Replaced by DP 2009-61). Tilburg: Finance. 2008. (CentER Discussion Paper).