Tax policy and entrepreneurship: empirical evidence from Sweden

Abstract

This paper examines the relationship between income taxes and the decision to become self-employed using data from Sweden. By making it possible to track a large number of individuals over extended time periods and across a number of tax rate changes while controlling for important additional determinants, available tax-return information from Sweden allows for statistical estimation of the influence that income taxes have on the probability of becoming self-employed. The changing tax rate structure combined with the fact that the Swedish tax system does not provide additional tax benefits to small-business entrepreneurs compared with those who work as employees provides a powerful setting through which to examine the tax rate structure's influence on individuals' choice to become selfemployed. Contrary to many earlier studies based on US data, this paper finds that both average and marginal taxes have a negative impact on the decision to become self-employed.

Tax structure and entrepreneurship

“…Moreover, they find that the effect is concave, suggesting that tax cuts affect entry rates only below a certain threshold tax level. A negative relationship between taxes and self employment was also obtained in Hansson (2010) using data from Sweden. Hansson studies the relationship between income taxes and the decision to become self employed using data from Sweden and finds, in contrast to many earlier studies using US data, 14 that both average and marginal taxes have a negative impact on the decision to become self employed.…”

Evasive Entrepreneurship and Institutional Change

“…Tax avoidance (legal) and tax evasion (illegal) are two typical examples of evasive entrepreneurship. Taxes that reduce the opportunities for individual wealth can be expected to have a negative effect on entrepreneurship (Hansson 2012;Henrekson and Sanandaji 2011b), as can the administrative burden associated with taxes . Evading them or enabling others to evade such taxes may therefore shift the PPF outwards.…”

Observations and recommendations for the women enterpreneurship in information technology

“…A growing literature in entrepreneurship focus on the theory and definition of entrepreneurship, innovation (Cantillon, 1964); on the forces and motivations for entrepreneurship (Knight, 2005;Sorensen and Nanda, 2013), behaviors of entrepreneurs (Hanssan, 2012), experiences and strategies of entrepreneurs (Navale, 2013). Published research studies of the female entrepreneur have ranged from psychological and demographic studies (Sexton and Bowman-Upton, 1990;Ahl, 2003) to perceived start-up obstacles (Hisrich and Brush, 1984).…”