The Effects of Tax Policies on Entrepreneurship in Emerging Versus Mature Economies: Do Differences Exist Between Nascent and Established Firms?

Abstract

An extensive body of research defines various levels of entrepreneurship and considers emerging trends. This study uses data from Global Entrepreneurship Monitor (GEM) in developing a model that measures the impact of taxes and bureaucracy on entrepreneurship. The analysis considers effects by type of firm – nascent and established – and type of economy – emerging and mature. The aim of the manuscript is to test directional impact of tax policies on entrepreneurial activity. The model utilizes counter and dichotomous variables to measure effects before, during, and after the 2008-2009 Financial Crisis. Tax policies adversely impact both nascent and established firms within an emerging economy but have a positive correlation with nascent firms in a mature economy. The fact that nascent firm development increases after the Financial Crisis suggests that tax policies may offer a foundation of support for those firms that otherwise may be burdensome.