Corporate Taxation and the Size of New Firms: Evidence from Europe

TILEC Discussion Paper No. 2009-036

CentER Discussion Paper Series No. 2009-72

14 Pages Posted: 17 Sep 2009 Last revised: 14 Dec 2009

See all articles by Marco Da Rin

Marco Da Rin

Tilburg University, Department of Finance; Tilburg Law and Economics Center (TILEC); European Corporate Governance Institute (ECGI)

Marina Di Giacomo

University of Torino - Department of Economics, Social Sciences, Applied Mathematics and Statistics

Alessandro Sembenelli

University of Turin - Department of Economics and Financial Sciences G. Prato

Date Written: September 15, 2009

Abstract

Using a novel country-industry level panel database with information on newly incorporated firms in 17 European countries between 1997 and 2004, we study how taxation of corporate income affects the size of entrants at the country-industry level. Our results, that are robust to changes in several assumptions, suggest that a reduction in the effective corporate income tax rate leads to a significant reduction of the capital size of entrants, and to a decrease in their capital-labor ratio.

Keywords: Entrepreneurship, Corporate income taxation, Incorporation, Firm entry, Firm size, Entry regulation, Panel data

JEL Classification: C23, H32, L26, L51, M13

Suggested Citation

Da Rin, Marco and Di Giacomo, Marina and Sembenelli, Alessandro, Corporate Taxation and the Size of New Firms: Evidence from Europe (September 15, 2009). TILEC Discussion Paper No. 2009-036. Available at SSRN: https://ssrn.com/abstract=1474197 or http://dx.doi.org/10.2139/ssrn.1474197

Marco Da Rin (Contact Author)

Tilburg University, Department of Finance ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Tilburg Law and Economics Center (TILEC)

Warandelaan 2
Tilburg, 5000 LE
Netherlands

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Marina Di Giacomo

University of Torino - Department of Economics, Social Sciences, Applied Mathematics and Statistics ( email )

Corso Unione Sovietica 218 bis
Torino, 10134
Italy
+39 011 6706074 (Phone)
+39 011 6706062 (Fax)

HOME PAGE: http://www.unito.it/persone/madigiac

Alessandro Sembenelli

University of Turin - Department of Economics and Financial Sciences G. Prato ( email )

C. so Unione Sovietica, 218 Bis
Torino, 13820-4020
Italy
+39 011 670 6059 (Phone)
+39 011 670 6062 (Fax)

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