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Tax Policy and Firm Entry and Exit Dynamics: Evidence from OECD Countries

Richard Kneller and Danny McGowan ()
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Danny McGowan: Bangor Business School

No 12006, Working Papers from Bangor Business School, Prifysgol Bangor University (Cymru / Wales)

Abstract: In this paper we study the effects of reforms to corporate and personal income taxation on the rate of firm entry and exit using industry data for 19 OECD countries from 1998 to 2005. Using a difference-in-differences approach to correct for endogeneity bias we find that increases in corporate taxation affect entry but not exit. The effects of personal taxation depend upon the marginal tax rate that is altered. Increases in marginal tax rates applied at low income levels negatively affect entry and positively affect exit, whereas marginal tax reforms at higher income levels have the opposite effect.

Keywords: income taxation; firm entry; firm exit; difference in differences (search for similar items in EconPapers)
JEL-codes: D22 H2 H32 L26 (search for similar items in EconPapers)
Date: 2012-04
New Economics Papers: this item is included in nep-acc, nep-ent, nep-pbe and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

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http://www.bangor.ac.uk/business/research/documents/BBSWP12006.pdf (application/pdf)

Related works:
Working Paper: Tax Policy and Firm Entry and Exit Dynamics: Evidence from OECD Countries (2012) Downloads
Working Paper: Tax Policy and Firm Entry and Exit Dynamics: Evidence from OECD Countries (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:bng:wpaper:12006

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