|
on Small Business Management |
|
Issue of 2017‒10‒22
twenty-two papers chosen by João Carlos Correia Leitão Universidade da Beira Interior |
| By: | Dolores Añón Higón (Department of Economic Structure, University of Valencia, Avda. dels Tarongers s/n, 46022 Valencia (Spain).); Juan A. Mañez (Department of Economic Structure, University of Valencia, Avda. dels Tarongers s/n, 46022 Valencia (Spain).); Juan A. Sanchis (Department of Economic Structure, University of Valencia, Avda. dels Tarongers s/n, 46022 Valencia (Spain).) |
| Abstract: | The aim of this study is to ascertain the impact of two firm innovation strategies – namely, intramural R&D and external R&D, including either contracted R&D and import of technology, upon total factor productivity (TFP). In order to evaluate these effects we consider robust estimates of TFP through a GMM approach where we account for the diverse innovation strategies carried out by firms (intramural only, external only or both). Using data for Spanish manufacturing firms drawn from the Encuesta de Estrategias Empresariales (ESEE), over the period 1991-2014, our results suggest that inhouse R&D and external R&D are complementary strategies only for large fims in high tech sectors. For the rest of firms, both strategies turn out to be substitutive. |
| Keywords: | intramural R&D, external R&D, complementarity, substitutability, TFP |
| Date: | 2017–06 |
| URL: | http://d.repec.org/n?u=RePEc:eec:wpaper:1706&r=sbm |
| By: | Xiuli Sun; Haizheng Li; Vivek Ghosal |
| Abstract: | Understanding the factors that may produce a sustained rate of innovation is important for promoting economic development and growth. In this paper, we examine the role of human capital in firms’ innovation by using a large sample of manufacturing firms from China. We use two firm-level datasets from China: one from metropolitan cities, and one from provincial small and medium sized cities. Patent applications are used as the measure of innovation. Human capital indicators used include skilled human capital (number of highly educated workers), general manager’s education and tenure, and management team’s education and age. We find that skilled human capital has a significant positive effect on firms’ innovation, while the management team’s age has a significant negative effect on innovation. The General Manager’s tenure plays a significant positive role in firm innovation in metropolitan cities, while it is the General Manager’s education that has a positive and significant effect on firms’ innovation in small and middle cities. We also find that the effect of R&D on patents is insignificant for firms in large cities, but it is positive and significant in the smaller and medium sized cities. We conclude by noting some policy issues for promoting innovation in developing economies. |
| Keywords: | human capital, education, innovation, patents, R&D, economic development, Asia, China |
| JEL: | J24 I25 D21 D22 L13 O32 O33 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_6370&r=sbm |
| By: | Sara Amoroso (European Commission - JRC); Alex Coad (CENTRUM Católica Graduate Business School, Pontificia Universidad Católica del Perú, Lima, Perú); Nicola Grassano (European Commission – JRC) |
| Abstract: | Recent empirical studies have investigated the territorial impact of Europe’s research policies, in particular the contribution of the European Framework Programmes to the integration of a European Research Area. This paper deepens the analysis on the integration and participation of peripheral regions, by focusing on the differences in intensity and determinants of inter-regional collaborations across three groups of collaborations. We consider collaborations among more developed regions, between more and less developed regions, and among less developed regions. Building on the recent spatial interaction literature, this paper investigates the effects of physical, institutional, social and technological proximity on the intensity of inter-regional research collaboration across heterogeneous European regions. We find that the impact of disparities in human capital and technological proximity on regional R&D cooperation is relevant and differs across subgroups of collaborations. Moreover, despite the efforts of integrating marginal actors, peripheral regions have lower rates of collaborations. |
| Keywords: | European Research Area, spatial interaction modelling, R&D collaboration, regional integration |
| JEL: | O38 L14 F15 R15 |
| Date: | 2017–07 |
| URL: | http://d.repec.org/n?u=RePEc:ipt:wpaper:201705&r=sbm |
| By: | Sara Amoroso (European Commission - JRC); David B. Audretsch (Indiana University); Albert N. Link (Bryan School of Business and Economics University of North Carolina-Greensboro) |
| Abstract: | The purpose of this paper is to explore the relationship between an entrepreneur’s experience and education and his/her reliance on alternative sources of knowledge for exploring new business opportunities. The extant literature that is at the crossroads between sources of knowledge and the experiential and intellectual base of an entrepreneur (i.e., dimensions of his/her human capital) suggests that it is through experience and through education that an entrepreneur obtains knowledge. Using information on a sample of high-tech manufacturing firms across 10 European countries, we explore heterogeneities in the influence of experience, age, and education of the firm’s primary founder on the perceived importance of (i.e., use of) alternative sources of knowledge. We find that the association of these characteristics differs significantly across sources of knowledge, and across European regions. Education is positively related to the importance of knowledge from research institutes and internal know-how, while age is negatively related to the importance of research institutes and positively related to publications and conferences. On the one hand, in South/East European countries, the importance of internal know-how is positively associated with age and education, but negatively associated with experience. On the other hand, the characteristics of primary founders of North/West European firms are more linked to the importance of the participation to funded research programmes. This source of knowledge is related positively with age and education and negatively with experience. |
| Keywords: | Entrepreneurship; Knowledge; Experience; Education; Human Capital |
| JEL: | L26 J24 D83 |
| Date: | 2017–05 |
| URL: | http://d.repec.org/n?u=RePEc:ipt:wpaper:201703&r=sbm |
| By: | Zheng, Liang; Zhao, Zhong |
| Abstract: | Since Chinese government initiated economic reform in the late 1970s, entrepreneurship and private sectors have emerged gradually and played an increasingly important role in promoting economic growth. However, entrepreneurship is distributed unevenly in China. Using micro data from 2008 economic census and 2005 population census, this paper explains spatial clusters of entrepreneurship for both manufacturing and services. For both sectors, entrepreneurship (measured by new private firms) tends to emerge in places with more relevant upstream and downstream firms. Moreover, Chinitz's (1961) theories are also supported for manufacturing: small upstream and downstream firms seem to be more important for manufacturing entrepreneurship. For both sectors, entrepreneurship is positively related to city size, the share of young adults and the elderly population, and foreign direct investment. More migrants are also found to promote service entrepreneurship. Our paper is the first to consider both manufacturing and service entrepreneurship in China and should be of interest to both local and national policymakers who plan to encourage entrepreneurship. |
| Keywords: | New Firm Formation,Entrepreneurship,Marshallian Effect,Chinitz Effect,China |
| JEL: | L26 L60 L80 R10 R12 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:glodps:127&r=sbm |
| By: | Tedi Skiti (Fox School of Business, Temple University) |
| Abstract: | In this article, I present causal effects of institutional entry barriers to new firms on incumbents’ technological innovation. In particular, I investigate the effect of entry barriers to municipal providers on incumbents’ technology deployment in the U.S. broadband industry. I use a spatial regression discontinuity design for private incumbents’ investment behavior and different entry regimes as sharp cutoffs for municipal entry threat. I collect and combine unique firm-level data on cable investment decisions and state-level data on legal entry barriers. I find that in markets with these entry barriers incumbents invest less in new technologies. Specifically, I find that the local entry barriers lead to a 20% lower technology adoption rate by cable incumbents because of reduced entry threat. These results imply that institutions that restrict entry of new firms can lead to significantly decreased technological innovation and lower internet quality across local markets, not only by deterring new firms but also by altering incumbents’ strategic investment in broadband networks. |
| Keywords: | Innovation, Entry Barriers, Broadband, Municipal, Spatial Discontinuity |
| Date: | 2017–09 |
| URL: | http://d.repec.org/n?u=RePEc:net:wpaper:1711&r=sbm |
| By: | Geovanny Castro Aristizabal; Luis Eduardo Giron Cruz; Daniel Soto Cuadros (Faculty of Economics and Management, Pontificia Universidad Javeriana Cali) |
| Abstract: | The present study finds the main factors that influence entrepreneurship in Colombia, Chile and Ecuador, based on data from the Global Entrepreneurship Monitor -GEM, 2014- and the Entrepreneurship Activity Rate -TEA-. For this, initially, the multivariate method of Multiple Correspondence Analysis was used. Subsequently, a binomial logit model was estimated for each of the countries. It was found that both formal and informal human capital are determinant to generate entrepreneurship by opportunity. Likewise, experience, empirical knowledge, gender and age. Finally, by including in the model the technological level of the sector (medium-high), it was estimated that Chile has a greater impact on entrepreneurship. given the current situation of diminishing tensions with the US government. |
| Keywords: | Cuba, Entrepreneurship opportunity, Logit models, Multiple Correspondence Analysis, Human Capital, Colombia, Ecuador, Chile. |
| JEL: | J24 L26 Y40 |
| Date: | 2017–10 |
| URL: | http://d.repec.org/n?u=RePEc:ddt:wpaper:29&r=sbm |
| By: | Roud Vitaliy (National Research University Higher School of Economics); Valeriya Vlasova (National Research University Higher School of Economics) |
| Abstract: | This paper develops an integrated framework to examine the determinants of industry-science cooperation in the general process of developing innovation. Based on the literature review and using firm-level data on innovation strategies of 805 manufacturing enterprises in Russia we investigate what are the incentives to firms (1) to cooperate with universities and R&D organizations and (2) to choose a particular mode of interaction that ranges from purchasing S&T services to a full scale original R&D aimed at creating new-to-market innovation. We suggest that a broad range of intramural and external determinants, including competition regime, absorptive capacity, technological opportunities, appropriability conditions, public support, as well as barriers to the practical application of R&D results influence the firm’s decision on cooperation with knowledge producers. The findings indicate that the scale of industry-science linkages in Russian manufacturing is limited and generally hampered by low propensity of business to the R&D-based innovation strategies |
| Keywords: | Science-industry cooperation; Innovation strategy; Firm-level; Manufacturing; Russia |
| JEL: | D22 D83 L2 O31 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:hig:wpaper:75sti2017&r=sbm |
| By: | Pietro Moncada Paternò Castello |
| Abstract: | The Thesis is composed by three complementary research investigations on the economic and policy aspects of EU corporate R&D.Collectively, the work first reviews the theoretical and empirical literature of corporate R&D intensity decomposition; it then investigates the EU R&D intensity and its decomposition elements comparatively with most closed competitors and with emerging economies over the period 2005-2013. Finally, it inspects further some key aspects that can be associated to the EU R&D intensity gap: sectoral dynamics and the resulting sectoral and technological specialisations as well as the drivers for R&D investment growth across sectors and firms' age groups of top R&D investing firms over time. These studies also address the possible policy implications that derive from their outcomes.The investigations rely on literature as well as on company data, mainly from nine editions (2006-2014) of the EU Industrial R&D Investment Scoreboard. For analytical purposes they use literature review, meta-analysis, descriptive statistics, R&D intensity decomposition computational approach, Manhattan distance and Technological Revealed Comparative Advantage metrics, and a multinominal logit regression model. The results of these three research works are novel in several aspects. It indicates that literature results on R&D intensity decomposition differ because of data and methodological heterogeneities, and that the structural cause is the main determinant of EU R&D intensity gap if sector compositions of the countries are considered. It inspects how the use of different data sources and analytical methods impact differently on R&D intensity decomposition results, and what the analytical and policy implications are.The empirical research results of this Thesis confirm the structural nature of the EU R&D intensity gap. In the last decade the gap between the EU and the USA has widened, whereas the EU gap with Japan has remained relatively stable. In contrast, the emerging countries' R&D intensity gap compared to the EU has remained relatively stable, while companies from emerging economies are considerably reducing such gap. Besides, as novel contribution to the state of the art of the literature, this Thesis uncovers the differences between EU and US by inspecting which sectors, countries and firms are more accountable for the aggregate R&D intensity performance of these two economies, and it finds a high heterogeneity of firms' R&D intensity within sectors. Furthermore, it shows that there is a bigger population of both larger and smaller US top R&D firms which invest more strongly in R&D than competitors, and that the global R&D investment is concentrated in a few firms, countries and industries. Finally, the research founds a slightly higher EU R&D shift over sectors compared to the US, but not strongly enough towards high-tech sectors. Also, the EU has an even broader technological specialisation than its already broad industrial R&D sector specialisation, while the USA leads by number of technological fields belonging mostly to the industrial R&D sectors of its specialisation. Furthermore, the EU has been better able than the USA and Japan to maintain its world share of R&D investment even during the years of economic and financial crisis. Lastly, the study also indicates that firms make a complementary use of capital expenditures and R&D intensity for their R&D investment growth strategies and it reveals that there are differences in their use between firms' age classes across sectors. Overall, the main results of the Thesis suggest that to reach a more positive R&D dynamics and boost its competitiveness, the EU should adapt its industrial structure and increase the weight of high R&D intensive sectors. A focus on creating the conditions for firm creation and growth in new-emerging innovative sectors is advised together with favouring the exploitation of the full capacity of EU leading - but mature - sectors to also absorb high-technology from other sectors. |
| Keywords: | Corporate R&D intensity decomposition; EU corporate R&D intensity gap; Top world R&D investors; Corporate R&D distribution; Sectors' dynamics; Sector specialisation; Technological specialisation; R&D investment growth; EU industry; EU R&D policy; Literature survey; Empirical analysis |
| Date: | 2017–10–20 |
| URL: | http://d.repec.org/n?u=RePEc:ulb:ulbeco:2013/258776&r=sbm |
| By: | Grüning, Patrick |
| Abstract: | Empirical evidence suggests that investments in research and development (R&D) by older and larger firms are more spread out internationally than R&D investments by younger and smaller firms. In this paper, I explore the quantitative implications of this type of heterogeneity by assuming that incumbents, i.e. current monopolists engaging in incremental innovation, have a higher degree of internationalization in their R&D technologies than entrants, i.e. new firms engaging in radical innovation, in a two-country endogenous growth general equilibrium model. In particular, this assumption allows the model to break the perfect correlation between incumbents' and entrants' innovation probabilities and to match the empirical counterpart exactly. |
| Keywords: | Heterogeneous innovation,Technology spillover,Endogenous growth,Creative destruction,International finance |
| JEL: | E22 F31 G12 O30 O41 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:safewp:185&r=sbm |
| By: | Alex Coad; Nanditha Mathew; Emanuele Pugliese |
| Abstract: | We investigate the effects of R&D investment on performance outcomes (sales growth and relative profitability) for Indian manufacturing firms. Previous research shows contradictory results - while some studies find a positive effect of R&D on firm performance, some find that firms investing in R&D do not perform significantly better, in some cases, even perform worse than their non-investing counterparts. We claim that the effects of R&D on performance are often mis-specified: The contradictory results are likely due to 1) inverse causality, i.e., firms invest in R&D as a function of sales growth and/or 2) a bias caused by censored data (i.e. R&D investment has a lower bound at zero). We apply endogenous switching regression to tackle the issue of selection and censored data, and the results we observe are sharp: firms investing in R&D would have had less growth and less relative profitability if they had not done so. Interestingly, firms that did not invest in R&D would not have benefited had they done so. |
| Keywords: | R&D investment, Firm performance, Endogenous switching |
| Date: | 2017–09–09 |
| URL: | http://d.repec.org/n?u=RePEc:ssa:lemwps:2017/21&r=sbm |
| By: | Alex Coad (CENTRUM-Catolica Graduate Business School, Pontificia Universidad Catolica del Peru, Lima, Peru.) |
| Abstract: | Do firms in the same sector converge towards the same R&D intensities? Previous research has often assumed this to be true. A closer examination, using microdata from the EU Industrial R&D Investment Scoreboard for the years 2000-2015, shows a large amount of heterogeneity in R&D intensities among firms in the same sector, and that this heterogeneity persists over time. Statistical tests of convergence show that the variation in R&D intensities does not decrease over time (i.e. no ?-convergence), although firms with an R&D intensity below the industry average do seem to catch up with the leaders (i.e. evidence of ?-convergence). Overall, firms in the same industry do not converge to a common R&D intensity. Policy implications are discussed. |
| Keywords: | R&D investment, R&D intensity, convergence, benchmarking |
| JEL: | O3 L2 |
| Date: | 2017–07 |
| URL: | http://d.repec.org/n?u=RePEc:ipt:wpaper:201704&r=sbm |
| By: | Alex Coad (CENTRUM Católica Graduate Business School, Pontificia Universidad Católica del Perú, Lima, Perú); Antonio Vezzani (European Commission - JRC) |
| Abstract: | Many industrialized countries in Europe and North America have experienced a steady decline in the manufacturing sector over the last few decades. Amid growing concerns that outsourcing and offshoring have destabilized European economies, policymakers have suggested that a large manufacturing sector can: i) boost R&D, ii) encourage exporting, and iii) raise productivity. We examine these claims. Non-parametric plots and regressions show a robust positive association between the manufacturing sector and Business R&D expenditures (BERD), while the relationship between manufacturing and exports or productivity is more elusive. Finally, we explore whether a manufacturing sector target of 20% of value-added will help reach a BERD target of 3% of GDP. |
| Keywords: | Manufacturing sector, R&D, exporting, productivity, industrial policy, industrial renaissance |
| Date: | 2017–09 |
| URL: | http://d.repec.org/n?u=RePEc:ipt:wpaper:201706&r=sbm |
| By: | Osoro, Otieno; Voeten, Jaap (Tilburg University, School of Economics and Management) |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:tiu:tiutis:6a75bba4-dd50-475c-a0f7-65c9ebfbd980&r=sbm |
| By: | Xin Huang (Graduate School of Economics, Osaka University); Koichi Nakagawa (Graduate School of Economics, Osaka University); Jie Li (School of Management, Shanghai University) |
| Abstract: | Employing data from Chinese companies listed on the board for small and medium-sized enterprises (SMEs), the research examines the relationship between top management team (TMT) characteristics and corporate charitable activities in China. My findings confirm: 1) Firms less engaged in charitable activities are likely to have TMTs characterized by more educational specialty in science and engineering, and more functional background in output functions; 2) TMT age heterogeneity has a significant and positive effect on corporate charitable activities, while TMT educational specialty heterogeneity has a negative influence on corporate charitable activities; 3) TMT age, tenure, educational level and these heterogeneities of tenure, educational level and functional background have little or no influence on corporate charitable activities. Based on the upper echelons theory, the study can provide evidence for further research on top management teams and corporate social responsibility in an emerging economy. |
| Keywords: | top management team; charity; heterogeneity; corporate social responsibility; Chinese companies |
| JEL: | M54 M12 M14 |
| Date: | 2017–10 |
| URL: | http://d.repec.org/n?u=RePEc:osk:wpaper:1730&r=sbm |
| By: | Steven Brakman; Harry Garretsen; Raoul van Maarseveen; Peter Zwaneveld |
| Abstract: | Stimulating firms to become exporters is of interest to policy makers, as exporters are in general more productive than non-exporters. However, selecting high export potentials is difficult in practice. The contribution of this paper is to characterize and identify these (high) export potentials. According to the Melitz (2003) model, potential exporters have to be productive enough to overcome the entry costs of foreign markets. Once firms pass this productivity threshold, they all export. Empirical evidence, however, indicates that a substantial share of high-productive firms does not export. In this paper, we focus specifically on this group of high-productive non-exporters. We employ a large micro-dataset for Dutch firms both in services and manufacturing for 2010-2014. Our findings are threefold. First, high productivity is an important, but not a sufficient condition for exporting. Firm size (substitute for productivity), import status, and foreign ownership are also important. Second, firm location is crucial. A location in peripheral areas prevents high productive firms from exporting; especially a location in the Northern part of the Netherlands reduces the probability to export. Third, the manufacturing sector differs from the services sector. Given that the median exporter in our sample is a services firm; this sector should be included in export research. |
| Keywords: | firm heterogeneity, export behavior, location |
| JEL: | F12 F14 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_6544&r=sbm |
| By: | Ritter-Hayashi, D.; Voeten, Jaap (Tilburg University, School of Economics and Management) |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:tiu:tiutis:5baca0e0-cd74-4bb2-bc45-517cea3fdee2&r=sbm |
| By: | Abhiroop Mukherjee (Associate Professor, Department of Finance, Hong Kong University of Science and Technology; Institute for Emerging Market Studies, Hong Kong University of Science and Technology); Alminas Zaldokas (Assistant Professor, Department of Economics, Hong Kong University of Science and Technology; Institute for Emerging Market Studies, Hong Kong University of Science and Technology) |
| Abstract: | Abhiroop Mukherjee and Alminas Zaldokas, HKUST IEMS Faculty Associates, examined how tax changes influence patenting activity in corporations, and found that tax increases would likely lead to lower innovation, but it would not be easy to reverse these losses quickly by cutting taxes back later. |
| Keywords: | corporate governance, development, emerging market and developing economies, emerging markets, innovation, patents, R&D, research and development |
| Date: | 2017–07 |
| URL: | http://d.repec.org/n?u=RePEc:hku:briefs:201616&r=sbm |
| By: | De Martiis, Angela; Fidrmuc, Jarko |
| Abstract: | We analyze how regional quality affects firm’s efficiency by identifying the impaired firms receiving financial assistance as those paying an implicit interest rate lower than the prime rate. Then, we decompose them into: real impaired firms unable to repay their loans, and those not repaying their debts even if financially they could. The regions with a high share of loans and crime exhibit a higher concentration of distressed firms, and crime increases the performance of existing companies. |
| JEL: | O43 E51 G33 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc17:168234&r=sbm |
| By: | Tiago Fonseca (World Maritime University; CEG-IST, Instituto Superior Técnico, Universidade de Lisboa); Francisco Lima (CEG-IST, Instituto Superior Técnico, Universidade de Lisboa); Sonia C. Pereira (Barnard College, Columbia University and Columbia School of Social Work) |
| Abstract: | As job markets have been polarizing, firms have been changing their labor inputs.By using matched employer-employee data for Portugal, we examine whether labor market polarization has occurred within or across firms and how labor input upgrades have contributed to overall productivity growth. We develop a firm taxonomy based on worker’s occupational data. Firms can be focused on one task – Abstract, Manual or Routine – on a combination of tasks, or none. Results show that Abstract firms are the most productive and their share has increased over time. Manual firms, the least productive, have had a stable share throughout the period. Routine firms have seen their share decline over time. The dynamic decomposition of the estimated productivity reveal that productivity growth is propelled by increased market shares of the most productive incumbents and exiting of the least productive, especially for Abstract firms. Notwithstanding these productivity growth drivers, they fail to avert the productivity stagnation observed in Portugal between 2004 and 2009 due to the overall decline in productivity of incumbent firms, especially Routine. We discuss the policy implications of our results which are relevant to other European economies also lagging behind in terms of knowledge and innovation capabilities. |
| Keywords: | Taxonomy, productivity, routinization, technological change, polarization |
| JEL: | D24 L23 O33 |
| Date: | 2017–09 |
| URL: | http://d.repec.org/n?u=RePEc:mde:wpaper:0080&r=sbm |
| By: | Neira, Julian; Singhania, Rish |
| Abstract: | The business startup rate in the United States has exhibited a large secular decline in recent decades. The reasons behind the decline are not well understood. This paper hypothesizes that the startup rate declined in large part because corporate taxes raised the opportunity cost of entrepreneurship. We formalize this thesis using a model of occupational choice that features firm entry and exit. Quantitatively, the model accounts for much of the decline in the startup rate. Taxes alone account for one-fifth of the decline. Cross-sectoral patterns in US data support our results. |
| Keywords: | Firm Entry, Startups, Corporate Taxes, Declining Business Dynamism, Occupational Choice |
| JEL: | D2 E2 E6 H2 |
| Date: | 2017–09–26 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:81662&r=sbm |
| By: | Frank Fossen; Ray Rees; Davud Rostam-Afschar; Viktor Steiner |
| Abstract: | 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. |
| Keywords: | taxation, entrepreneurship, portfolio choice, investment |
| JEL: | H24 H25 H26 L26 G11 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_6558&r=sbm |