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Entrepreneurship and the policy environment

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Author Info
Yannis Georgellis
Howard J. Wall

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Abstract

This paper uses a spatial panel approach to examine the effect of the government-policy environment on the level of entrepreneurship. Specifically, we investigate whether marginal income tax rates and bankruptcy exemptions influence rates of entrepreneurship. Whereas previous work in the literature finds that both policies are positively related to entrepreneurship, we find non-monotonic relationships: a U-shaped relationship between marginal tax rates and entrepreneurship and an S-shaped relationship between bankruptcy exemptions and entrepreneurship.

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Paper provided by Federal Reserve Bank of St. Louis in its series Working Papers with number 2002-019.

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Date of creation: 2004
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Publication status: Published in Federal Reserve Bank of St. Louis Review, March/April 2006, 88(2), pp. 95-111
Handle: RePEc:fip:fedlwp:2002-019

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Keywords: Business enterprises Taxation Bankruptcy

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This paper has been announced in the following NEP Reports: References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Taylor, Mark P, 1996. "Earnings, Independence or Unemployment: Why Become Self-Employed?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 58(2), pages 253-66, May.
  2. Cowling, Marc & Mitchell, Peter, 1997. "The Evolution of U.K. Self-Employment: A Study of Government Policy and the Role of the Macroeconomy," The Manchester School of Economic & Social Studies, Blackwell Publishing, vol. 65(4), pages 427-42, September.
  3. Robson, Martin T, 1998. " The Rise in Self-Employment amongst UK Males," Small Business Economics, Springer, vol. 10(3), pages 199-212, May. [Downloadable!] (restricted)
  4. Dye, Ronald A, 1986. "An Economic Analysis of Bankruptcy Statutes," Economic Inquiry, Oxford University Press, vol. 24(3), pages 417-28, July.
  5. Wall, Howard J., 2004. "Entrepreneurship and the deregulation of banking," Economics Letters, Elsevier, vol. 82(3), pages 333-339, March. [Downloadable!] (restricted)
  6. Scott Fay & Erik Hurst & Michelle J. White, 2002. "The Household Bankruptcy Decision," American Economic Review, American Economic Association, vol. 92(3), pages 706-718, June. [Downloadable!]
  7. Blanchflower, David G., 2000. "Self-employment in OECD countries," Labour Economics, Elsevier, vol. 7(5), pages 471-505, September. [Downloadable!] (restricted)
    Other versions:
  8. Jeremy Berkowitz & Michelle J. White, 2004. "Bankruptcy and Small Firms' Access to Credit," RAND Journal of Economics, The RAND Corporation, vol. 35(1), pages 69-84, Spring.
  9. Gropp, Reint & Scholz, John Karl & White, Michelle J, 1997. "Personal Bankruptcy and Credit Supply and Demand," The Quarterly Journal of Economics, MIT Press, vol. 112(1), pages 217-51, February.
    Other versions:
  10. Le, Anh T, 1999. " Empirical Studies of Self-Employment," Journal of Economic Surveys, Blackwell Publishing, vol. 13(4), pages 381-416, September. [Downloadable!] (restricted)
  11. Douglas Holtz-Eakin & David Joulfaian & Harvey S. Rosen, 1994. "Entrepreneurial Decisions and Liquidity Constraints," NBER Working Papers 4526, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  12. Bruce, Donald, 2000. "Effects of the United States tax system on transitions into self-employment," Labour Economics, Elsevier, vol. 7(5), pages 545-574, September. [Downloadable!] (restricted)
  13. Roger H. Gordon & Julie Berry Cullen, 2002. "Taxes and Entrepreneurial Activity: Theory and Evidence for the U.S," NBER Working Papers 9015, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  14. Michael Hout & Harvey S. Rosen, 1999. "Self-Employment, Family Background, and Race," NBER Working Papers 7344, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  15. White, M.J., 1998. "Why It Pays to File for Bankruptcy: A Critical Look at Incentives Under U.S. Bankruptcy Laws and A Proposal for Change," Papers 98-02, Michigan - Center for Research on Economic & Social Theory.
  16. Rees, Hedley & Shah, Anup, 1986. "An Empirical Analysis of Self-employment in the U.K," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 1(1), pages 95-108, January. [Downloadable!] (restricted)
  17. Gill, Andrew M, 1988. "Choice of Employment Status and the Wages of Employees and the Self-employed: Some Further Evidence," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 3(3), pages 229-34, July-Sept. [Downloadable!] (restricted)
  18. Dunn, Thomas & Holtz-Eakin, Douglas, 2000. "Financial Capital, Human Capital, and the Transition to Self-Employment: Evidence from Intergenerational Links," Journal of Labor Economics, University of Chicago Press, vol. 18(2), pages 282-305, April. [Downloadable!] (restricted)
  19. Sandra E. Black & Philip E. Strahan, 2002. "Entrepreneurship and Bank Credit Availability," Journal of Finance, American Finance Association, vol. 57(6), pages 2807-2833, December. [Downloadable!] (restricted)
  20. Evans, David S & Leighton, Linda S, 1989. "Some Empirical Aspects of Entrepreneurship," American Economic Review, American Economic Association, vol. 79(3), pages 519-35, June. [Downloadable!] (restricted)
  21. Holtz-Eakin, Douglas & Joulfaian, David & Rosen, Harvey S, 1994. "Sticking It Out: Entrepreneurial Survival and Liquidity Constraints," Journal of Political Economy, University of Chicago Press, vol. 102(1), pages 53-75, February. [Downloadable!] (restricted)
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  22. Parker, Simon C, 1996. "A Time Series Model of Self-Employment under Uncertainty," Economica, London School of Economics and Political Science, vol. 63(251), pages 459-75, August. [Downloadable!] (restricted)
  23. William M. Gentry & R. Glenn Hubbard, 2000. "Tax Policy and Entrepreneurial Entry," American Economic Review, American Economic Association, vol. 90(2), pages 283-287, May. [Downloadable!] (restricted)
  24. Blau, David M, 1987. "A Time-Series Analysis of Self-employment in the United State," Journal of Political Economy, University of Chicago Press, vol. 95(3), pages 445-67, June. [Downloadable!] (restricted)
  25. Fan, Wei & White, Michelle J, 2003. "Personal Bankruptcy and the Level of Entrepreneurial Activity," Journal of Law & Economics, University of Chicago Press, vol. 46(2), pages 543-67, October.
  26. Thomas Dunn & Douglas Holtz-Eakin, 2000. "Financial Capital, Human Capital, and the Transition to Self-Employment:Evidence from Intergenerational Links," NBER Working Papers 5622, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  27. Evans, David S & Jovanovic, Boyan, 1989. "An Estimated Model of Entrepreneurial Choice under Liquidity Constraints," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 808-27, August. [Downloadable!] (restricted)
  28. Howard J. Wall & Yannis Georgellis, 2000. "What makes a region entrepreneurial? Evidence from Britain," The Annals of Regional Science, Springer, vol. 34(3), pages 385-403. [Downloadable!] (restricted)
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  29. Barton H. Hamilton, 2000. "Does Entrepreneurship Pay? An Empirical Analysis of the Returns to Self-Employment," Journal of Political Economy, University of Chicago Press, vol. 108(3), pages 604-631, June. [Downloadable!] (restricted)
  30. Blanchflower, David G & Oswald, Andrew J, 1998. "What Makes an Entrepreneur?," Journal of Labor Economics, University of Chicago Press, vol. 16(1), pages 26-60, January. [Downloadable!] (restricted)
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  31. Yannis Georgellis & Howard J. Wall, 2000. "Who are the self-employed?," Review, Federal Reserve Bank of St. Louis, issue Dec, pages 15-24. [Downloadable!]
  32. Donald Bruce & Mohammed Mohsin, 2006. "Tax Policy and Entrepreneurship: New Time Series Evidence," Small Business Economics, Springer, vol. 26(5), pages 409-425, 06. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Frank M. Fossen & Viktor Steiner, 2006. "Income Taxes and Entrepreneurial Choice : Empirical Evidence from Germany," Discussion Papers of DIW Berlin 582, DIW Berlin, German Institute for Economic Research. [Downloadable!]
    Other versions:
  2. Henrekson, Magnus & Sanandaji, Tino, 2008. "Taxing Entrepreneurial Income," Working Paper Series 732, Research Institute of Industrial Economics. [Downloadable!]
  3. Frank M. Fossen, 2007. "Risky Earnings, Taxation and Entrepreneurial Choice : A Microeconometric Model for Germany," SOEPpapers 29, DIW Berlin, The German Socio-Economic Panel (SOEP). [Downloadable!]
    Other versions:
  4. Da Rin, M. & Di Giacomo, M. & Sembenelli, A., 2008. "Firm Entry Dynamics and Taxation of Corporate Profits: Evidence from Europe," Discussion Paper 2008-65, Tilburg University, Center for Economic Research. [Downloadable!]
  5. Ruud de Mooij & Gaetan Nicodème, 2006. "Corporate Tax Policy, Entrepreneurship and Incorporation in the EU," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
    Other versions:
  6. Howard J. Wall, 2003. "Entrepreneurship and the deregulation of banking: how strong is the evidence?," Working Papers 2002-032, Federal Reserve Bank of St. Louis. [Downloadable!]
  7. Kevin Moore, 2004. "The effects of the 1986 and 1993 tax reforms on self-employment," Finance and Economics Discussion Series 2004-05, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
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