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Entrepreneurial innovations and taxation

Andreas Haufler (), Pehr-Johan Norbäck () and Lars Persson

No 9157, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Stimulating entrepreneurship is high on the policy agenda of many countries. We study the effects of tax policies on entrepreneurs’ choice of riskiness (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, whereas this imperfection does not arise when innovating for sale. 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; market entry (search for similar items in EconPapers)
JEL-codes: H25 L13 M13 O31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ent, nep-ino, nep-ppm and nep-tid
Date: 2012-09
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Related works:
Journal Article: Entrepreneurial innovations and taxation (2014) Downloads
Working Paper: Entrepreneurial Innovations and Taxation (2012) Downloads
Working Paper: Entrepreneurial innovations and taxation (2011) Downloads
Working Paper: Entrepreneurial Innovations and Taxation (2011) Downloads
Working Paper: Entrepreneurial innovations and taxation (2011) Downloads
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