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The Role of Corporate Taxes in the Decline of the Startup Rate

Julian Neira () and Rish Singhania

MPRA Paper from University Library of Munich, Germany

Abstract: The business startup rate in the United States has exhibited a large secular decline in recent decades. The reasons behind the decline are not well understood. This paper hypothesizes that the startup rate declined in large part because corporate taxes raised the opportunity cost of entrepreneurship. We formalize this thesis using a model of occupational choice that features firm entry and exit. Quantitatively, the model accounts for much of the decline in the startup rate. Taxes alone account for one-fifth of the decline. Cross-sectoral patterns in US data support our results.

Keywords: Firm Entry; Startups; Corporate Taxes; Declining Business Dynamism; Occupational Choice (search for similar items in EconPapers)
JEL-codes: D2 E2 E6 H2 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-acc, nep-cta, nep-ent, nep-mac, nep-pbe, nep-pub and nep-sbm
Date: 2017-09-26
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https://mpra.ub.uni-muenchen.de/81662/1/MPRA_paper_81662.pdf original version (application/pdf)

Related works:
Working Paper: The Role of Corporate Taxes in the Decline of the Startup Rate (2018) Downloads
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