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Tax Progressivity and Entrepreneurial Dynamics

Orkhan Nadirov () and Bruce Dehning ()
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Bruce Dehning: Argyros School of Business and Economics, Chapman University One University Drive, Orange, CA 92866, USA

Sustainability, 2020, vol. 12, issue 9, 1-21

Abstract: This study examines how tax progressivity affects entrepreneurial dynamics in 18 countries. The results show that increased downside progressivity has a positive influence on the transition rate from nascent entrepreneurship to established business ownership. In addition, only downside progressivity calculated using marginal tax rates is related to the transition ratio, implying that it is marginal tax rates, and not average tax rates, that are used in the entrepreneurial decision-making process. This paper contributes to our understanding of entrepreneurial dynamics and the effect of tax progressivity on the transition from nascent entrepreneurship to established business ownership.

Keywords: entrepreneurial dynamics; tax progressivity; transition ratio; panel data (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2020
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