Entrepreneurial innovations and taxation

Andreas Haufler, Pehr-Johan Norbäck and Lars Persson

Journal of Public Economics, 2014, vol. 113, issue C, 13-31

Abstract: Stimulating entrepreneurship is high on the policy agenda of many countries. We study the effects of tax policies on entrepreneurs' choice of riskiness (or quality) of an innovation project, and on their mode of commercializing the innovation (market entry versus sale). Limited loss offset provisions in the tax system induce entrepreneurs innovating for entry to choose projects with inefficiently little risk. The same distortion does not arise when entrepreneurs sell their innovation in a competitive bidding process to an incumbent before the uncertainty is revealed. Tax systems which systematically favor market entry of entrepreneurs can thus lead to welfare losses due to inefficient quality choices, despite leading to more competition in the product market.

Keywords: Business taxation; Innovation; Loss offset rules; Market entry (search for similar items in EconPapers)
JEL-codes: H25 L13 M13 O31 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (24)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0047272714000516
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Entrepreneurial innovations and taxation (2012)
Working Paper: Entrepreneurial Innovations and Taxation (2012)
Working Paper: Entrepreneurial innovations and taxation (2011)
Working Paper: Entrepreneurial Innovations and Taxation (2011)
Working Paper: Entrepreneurial innovations and taxation (2011)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:pubeco:v:113:y:2014:i:c:p:13-31

DOI: 10.1016/j.jpubeco.2014.03.002

Access Statistics for this article

Journal of Public Economics is currently edited by R. Boadway and J. Poterba

More articles in Journal of Public Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().