Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/81405
Authors: 
Asoni, Andrea
Sanandaji, Tino
Year of Publication: 
2009
Series/Report no.: 
IFN Working Paper 813
Abstract: 
We study the effect of taxation on entrepreneurship, taking into account both the amount of entry and the quality of new ventures. We show that even with risk neutral agents and no tax evasion progressive taxes can increase entrepreneurial entry, while reducing average firm quality. So called success taxes increase startup of lower value business ideas by reducing the option value of pursuing better projects. This suggests that the most common measure used in the literature, the likelihood of entry into self-employment, may underestimate the adverse effect of taxation.
Subjects: 
Taxation
Entrepreneurial Entry
Quality of Entrepreneurial Firms
JEL: 
H24
H25
L26
Document Type: 
Working Paper

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