Entrepreneurial Innovations and Taxation

49 Pages Posted: 2 Oct 2012

See all articles by Andreas Haufler

Andreas Haufler

University of Munich - Seminar for Economic Policy; CESifo (Center for Economic Studies and Ifo Institute)

Pehr-Johan Norbäck

Research Institute of Industrial Economics (IFN)

Lars Persson

Research Institute of Industrial Economics (IFN); Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 3 versions of this paper

Date Written: September 2012

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

JEL Classification: H25, L13, M13, O31

Suggested Citation

Haufler, Andreas and Norbäck, Pehr-Johan and Persson, Lars, Entrepreneurial Innovations and Taxation (September 2012). CEPR Discussion Paper No. DP9157, Available at SSRN: https://ssrn.com/abstract=2155527

Andreas Haufler (Contact Author)

University of Munich - Seminar for Economic Policy ( email )

Ludwigstrasse 28
Munich, D-80539
Germany

HOME PAGE: http://www.ecpol.vwl.uni-muenchen.de

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

Pehr-Johan Norbäck

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

Lars Persson

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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