Taxes and entrepreneurship in OECD countries

I examine how taxes and tax progressivity affect two different types of entrepreneurship--established business ownership and nascent entrepreneurship--in a large group of Organization for Economic Co-operation and Development countries, using 2000-2009 macro-level Global Entrepreneurship Monitor data. Empirical evidence from Arellano-Bond generalized method of moments estimation suggests that higher tax progressivity exerts a negative influence on nascent enterprises but appears to have no impact on established business ownership. Changes in marginal and average tax rates are found to have no significant influence on either type of entrepreneurship. The most important contribution of the article is the comparison of tax impacts on actual and nascent entrepreneurship rates. (JEL H24, H29, M13, M19)
I. INTRODUCTION In recent years, there have been heated debates in the United States (1) and some European Union countries about taxation and economic growth. There are people who believe [...]