Collateral Value and Entrepreneurship: Evidence from a Property Tax Reform
33 Pages Posted: 1 Sep 2022
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Collateral Value and Entrepreneurship: Evidence from a Property Tax Reform
Date Written: August 30, 2022
Abstract
We study the role of property taxes on entrepreneurial activity using a quasi-natural experiment, which unexpectedly reduced the upper bound of the Portuguese property tax rate for urban properties in 2008. Using a difference-in-differences approach, we nd that treated municipalities (i.e., municipalities that had a property tax rate above the new upper bound) experienced higher entry rates in the manufacturing sector vis-a-vis control municipalities (i.e., municipalities that had a property tax rate at or below the new upper bound). Taking advantage of rm-level data, we show that start-ups created as a response to the decrease in property taxes in treated municipalities use more debt, invest more, and are more likely to survive.
Keywords: Entrepreneurship, Property taxes, Savings, Portugal
JEL Classification: L26, H20, R30
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