On the effectiveness of state tax and expenditure policies to encourage entrepreneurship
Journal of Entrepreneurship and Public Policy
ISSN: 2045-2101
Article publication date: 24 September 2019
Issue publication date: 18 November 2019
Abstract
Purpose
The purpose of this paper is to expand the empirical literature on state tax and expenditure policies and entrepreneurial activity in several meaningful ways.
Design/methodology/approach
The authors update the panel data to include several more recent years and also consider other elements of state policy.
Findings
The most important takeaway is that even after dealing with some of the known shortcomings of dynamic panel analysis, we are still not able to find economically meaningful impacts of state tax and expenditure policies (generally defined) on entrepreneurial performance.
Research limitations/implications
Earlier studies that have found statistical significance have generally been limited to extensive-margin impacts on such things as self-employment rates or counts of new or small firms. When the authors examine what policy makers actually care about – things like income and employment among entrepreneurial ventures – the authors do not find much in the way of useful policy impacts.
Practical implications
To be sure, the authors find entrepreneurial performance to be statistically significantly related to certain tax rates and expenditure amounts, but the magnitudes of our estimated results cast serious doubts on the usefulness of these particular policy levers for generating meaningful improvements in entrepreneurial success.
Originality/value
The authors’ primary contribution is to improve the empirical consideration of the time series properties of the data. The authors provide a battery of more general and robust analyses to more completely surround the question.
Keywords
Acknowledgements
The authors are grateful to Christine Kymn, John Deskins, Xiaowen Liu, Daniel Wilmoth and Miriam Segal for assistance with the data and for helpful comments.
Citation
Bruce, D., Glass, E.A. and Harris, M.C. (2019), "On the effectiveness of state tax and expenditure policies to encourage entrepreneurship", Journal of Entrepreneurship and Public Policy, Vol. 8 No. 4, pp. 523-548. https://doi.org/10.1108/JEPP-03-2019-0020
Publisher
:Emerald Publishing Limited
Copyright © 2019, Emerald Publishing Limited