Entry regulation and entrepreneurship: a natural experiment in German craftsmanship

Rostam‐Afschar, Davud

doi:10.1007/s00181-013-0773-7

Cited by 42 publications

(32 citation statements)

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“…They also add that there is no evidence in their data that one model (i.e., low entry barriers) dominates the other (i.e., high entry barriers) in terms of aggregate performance. A few studies (e.g., Branstetter et al 2014;Rostam-Afschar 2014;Schulz et al 2016) focus on characteristics of new entrepreneurs and the quality of their ideas after reforms in entry regulations. In fact, the assumption that lowering startup costs leads to the entry of higher quality entrepreneurs has been challenged by these studies (Kaplan et al 2011;Branstetter et al 2014;Rostam-Afschar 2014).…”

Section: Start-up Costs and Innovative Entrepreneurshipmentioning

confidence: 99%

“…A few studies (e.g., Branstetter et al 2014;Rostam-Afschar 2014;Schulz et al 2016) focus on characteristics of new entrepreneurs and the quality of their ideas after reforms in entry regulations. In fact, the assumption that lowering startup costs leads to the entry of higher quality entrepreneurs has been challenged by these studies (Kaplan et al 2011;Branstetter et al 2014;Rostam-Afschar 2014). Rostam-Afschar (2014) uses a sample of German individuals and finds that reducing entry regulations leads to a higher number of untrained workers becoming entrepreneurs.…”

Section: Start-up Costs and Innovative Entrepreneurshipmentioning

confidence: 99%

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Taxes, start-up costs, and innovative entrepreneurship

et al. 2018

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Prior research investigates the role of start-up costs and taxes with regard to entrepreneurship. Yet, little distinction is made regarding the type of entrepreneurship, particularly innovative versus non-innovative entrepreneurship. We shall argue that start-up costs and taxes are associated in different ways with innovative versus non-innovative entrepreneurship. Taxes being recurring costs should mainly relate to innovative entrepreneurship, whereas start-up costs being one-off costs should mainly relate to non-innovative entrepreneurship. Analyzing a dataset of 632,116 individuals, including 43,223 entrepreneurs from 53 countries, we can partially confirm our predictions. Corporate taxes show a negative relationship with innovative entrepreneurship, whereas income taxes seem to have no relationship. High start-up costs have a positive relationship with innovative entrepreneurship, although this finding only holds true in cross-sectional investigations. Our paper contributes to the discussion on how governmental regulation and taxes relate to entrepreneurship.

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Section: Start-up Costs and Innovative Entrepreneurshipmentioning

confidence: 99%

Section: Start-up Costs and Innovative Entrepreneurshipmentioning

confidence: 99%

Taxes, start-up costs, and innovative entrepreneurship

et al. 2018

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“…Djankov et al (2002) further show that countries in which start-up regulations are most burdensome have high levels of corruption but not better quality public or private goods compared to other countries. However, their suggestion that lowering start-up costs leads to the entry of higher quality entrepreneurs has been challenged by several recent studies (Rostam-Afschar, 2013;Kaplan et al, 2011;Branstetter et al, 2013). For example, for a sample of German individuals, Rostam-Afschar (2013) finds that reducing entry regulations leads to a higher number of untrained workers becoming entrepreneurs.…”

Section: Start-up Costs and Innovative Entrepreneurshipmentioning

confidence: 99%

“…However, their suggestion that lowering start-up costs leads to the entry of higher quality entrepreneurs has been challenged by several recent studies (Rostam-Afschar, 2013;Kaplan et al, 2011;Branstetter et al, 2013). For example, for a sample of German individuals, Rostam-Afschar (2013) finds that reducing entry regulations leads to a higher number of untrained workers becoming entrepreneurs. This is mainly because high entry barriers primarily deter such untrained workers from becoming entrepreneurs.…”

Section: Start-up Costs and Innovative Entrepreneurshipmentioning

confidence: 99%

"Start-up costs, taxes and innovative entrepreneurship"

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et al. 2015

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“…The effects of the endogenous individual tax rate are identified by an instrumental variables approach of Gruber and Saez (2002) exploiting tax reforms and bracket creeping during our observation period. We also use legislation changes on entry regulation into skilled trades in 2004 (see Rostam-Afschar 2014) to account for selection into entrepreneurship. Our results indicate that a decrease in the marginal tax rate by 10 percentage points increases the portfolio share of private business equity conditional on owning a private business by 2.3% of the average conditional portfolio share (39%), but decreases the unconditional portfolio share by 2.9% of the unconditional average (3%).…”

Section: Introductionmentioning

confidence: 99%

How Do Entrepreneurial Portfolios Respond to Income Taxation?

et al. 2017

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We investigate how personal income taxes affect the portfolio share of personal wealth that entrepreneurs invest in their own business. In a reformulation of the standard portfolio choice model that allows for underreporting of private business income to tax authorities, we show that a fall in the tax rate may increase investment in risky entrepreneurial business equity at the intensive margin, but decrease entrepreneurial investment at the extensive margin. To test these hypotheses, we use household survey panel data for Germany eliciting the personal wealth composition in detail in 2002, 2007, and 2012. We analyze the effects of personal income taxes on the portfolio shares of six asset classes of private households, including private business equity. In a system of simultaneous demand equations in first differences, we identify the tax effects by an instrumental variables approach exploiting tax reforms during our observation period. To account for selection into entrepreneurship, we use changes in entry regulation into skilled trades. Estimation results are consistent with the predictions of our theoretical model. An important policy insight is that lower taxes drive out businesses that are viable only due to tax avoidance or evasion, but increase investment in private businesses that are also worthwhile in the absence of taxes.$ We thank participants at the Workshop on Self-Employment/Entrepreneurship and Public Policy at Oslo Fiscal Studies in 2016 and seminar participants at

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Entry regulation and entrepreneurship: a natural experiment in German craftsmanship

Cited by 42 publications

References 28 publications

Taxes, start-up costs, and innovative entrepreneurship

Taxes, start-up costs, and innovative entrepreneurship

"Start-up costs, taxes and innovative entrepreneurship"

How Do Entrepreneurial Portfolios Respond to Income Taxation?

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