The effects of tax incentives for small firms on employment levels

Carlos Corseuil and Rodrigo Leandro de Moura

No 701, FGV EPGE Economics Working Papers (Ensaios Economicos da EPGE) from EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil)

Abstract: This paper will examine the effects of tax incentives for small businesses on employment level evaluating a program with this purpose implemented in Brazil in the 1990s. We first develop a theoretical framework which guides both the de nition of the parameters of interest and their identi cation. Selection problems both into the treatment group and into the data sample are tackled by combining fixed effects methods and regression discontinuity design on alternative sub-samples of a longitudinal database of manufacturing firms. The results show that on the one hand the size composition of the treated fi rms may be changed due to the survival of some smaller firms that would have exited had it not been eligible to the program. On the other hand, the treated firms who do not depend on the program to survive do employ more workers.

Date: 2010-02-22
New Economics Papers: this item is included in nep-ent, nep-pbe and nep-pub
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Persistent link: https://EconPapers.repec.org/RePEc:fgv:epgewp:701

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