The role of corporate taxes in the decline of the startup rate

Julian Neira and Rish Singhania

Economic Inquiry, 2022, vol. 60, issue 3, 1277-1295

Abstract: The US has experienced a joint decline in corporate tax rates and startup rates in recent decades. We study how changes in corporate taxes affect startup rates in a firm dynamics model with occupational choice. A change in profit taxes has ambiguous effects on firm selection, and therefore on the startup rate. Quantitatively, the observed fall in US corporate tax rates generates, at most, one‐fifth of the startup rate decline. Sensitivity analysis suggests that this number is best interpreted as an upper bound, indicating that corporate taxes did not play a major role in the startup rate decline.

Date: 2022
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https://doi.org/10.1111/ecin.13066

Related works:
Working Paper: The Role of Corporate Taxes in the Decline of the Startup Rate (2018)
Working Paper: The Role of Corporate Taxes in the Decline of the Startup Rate (2017)
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