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Corporate Taxation and the Size of New Firms: Evidence from Europe

Marco Da Rin (), Marina Di Giacomo () and Alessandro Sembenelli ()

Journal of the European Economic Association, 2010, vol. 8, issue 2-3, 606-616

Abstract: Using a novel country-industry level panel database with information on newly incorporated firms in 17 European countries between 1997 and 2004, we study how taxation of corporate income affects the size of entrants at the country-industry level. Our results, which are robust to changes in several assumptions, suggest that a one-unit reduction in the effective corporate income tax rate leads to a reduction of entrants' capital size that ranges from 2.7% to 14.4%. Results on labor size are more mixed in terms of both sign and size. These findings imply that a reduction in corporate taxation reduces the capital to labor ratio. (JEL: C23, H32, L26, L51, M13) (c) 2010 by the European Economic Association.

JEL-codes: C23 H32 L26 L51 M13 (search for similar items in EconPapers)
Date: 2010
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Working Paper: Corporate taxation and the size of new firms: Evidence from Europe (2010) Downloads
Working Paper: Corporate Taxation and the Size of New Firms: Evidence From Europe (2009) Downloads
Working Paper: Corporate Taxation and the Size of New Firms: Evidence From Europe (2009) Downloads
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