Should tax policy favor high- or low-productivity firms?

Langenmayr, Dominika; Haufler, Andreas; Bauer, Christian

doi:10.1016/j.euroecorev.2014.10.005

Cited by 20 publications

(11 citation statements)

References 46 publications

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“…At microlevel, tax reforms may impact productivity (Foss, Mudambi, & Murtinu, 2019). The literature on the relationship between taxes and TFP (Langenmayr, Haufler, & Bauer, 2015; Schwellnus & Arnold, 2008) shows that taxes hinder TFP across firm sizes and ages. If this negative effect would be more pronounced for technology ventures (like those included in this study) that are on a promising trajectory toward the technological frontier, such an effect would be policy relevant not only for its micro implications in terms of TFP reduction, but also for a hindered reallocation of resources and market shares across industries and firms, which has been proved to push aggregate country‐level productivity (Auerbach & Hines, 2002).…”

Section: Tax Shifts and Firm Productivitymentioning

confidence: 99%

The government whispering to entrepreneurs: Public venture capital, policy shifts, and firm productivity

Murtinu

2020

Strategic Entrepreneurship

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Research Summary Grounding on the literature on resource dependence, board political capital, and principal–principal conflicts, I conceptualize governmental minority shareholding as a governance strategy through which ventures access information about future policy shifts and better calibrate their decisions before policy implementation. I test these arguments on multicountry firm‐level longitudinal data about European venture capital (VC)‐backed and comparable non‐VC‐backed companies. By means of a difference‐in‐differences methodology and exploiting the staggered announcement of tax reforms across countries, I show that public VC‐backed companies after a tax reform announcement show higher productivity than non‐VC‐backed ventures, and this effect lasts 4 years. After decomposing productivity, the post‐announcement effect of public VC backing is mainly due to both an output effect (sales value increase) and an enhanced efficiency in the labor factor. Managerial Summary Ventures facing market uncertainty may benefit from having a governmental minority shareholder on board. Governmental minority shareholders bring political capital in the form of information about future business‐related policy changes, as well as connections to debt capital providers. Plus, their minority status makes conflicts with the entrepreneur (and other shareholders) less likely. In this way, after a policy reform announcement, entrepreneurs backed by governmental minority shareholders (such as public venture capitalists) can better predict market changes and react more quickly than comparable non‐backed firms to those changes. In sum, governmental minority shareholding represents an effective governance strategy for ventures to reduce their uncertainty and access information and resources that would be out of reach for both the ventures and all other types of shareholders.

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Section: Tax Shifts and Firm Productivitymentioning

confidence: 99%

The government whispering to entrepreneurs: Public venture capital, policy shifts, and firm productivity

Murtinu

2020

Strategic Entrepreneurship

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“…1 An exception is Langenmayr et al (2015), who study incentives to dierentially tax high-and low-productivity rms, and nd that depending on the extent of prot-shifting opportunities, it may be optimal to discriminate in favor of either type of rm. As in much of the heterogeneous rms tax literature, their analysis emphasizes a corrective role for tax policies in the presence of imperfect competition.…”

Section: Introductionmentioning

confidence: 99%

Taxing and Subsidizing Foreign Investors

2017

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Many countries impose taxes on foreign investors while also having in place targeted subsidies and tax incentives that are designed to attract them. This paper shows that such a policy can be optimal from the standpoint of a host country. The government has an incentive to tax inframarginal rms because they are relatively immobile. It also has an incentive to subsidize marginal rms because the economic activity generated by such a subsidy can increase domestic wages in excess of the scal cost of the subsidy. These tax and subsidy policies improve host country welfare at the expense of foreigners. This analysis is thus able to provide an explanation for why tax coordination eorts can simultaneously entail reduced taxes and subsidies on foreign rms.

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“…Other models that introduce corporate taxation and imperfect deductibility areHaufler and Runkel (2012),Bauer et al (2014),Koethenbuerger and Stimmelmayr (2014),Langenmayr et al (2015),Irlacher and Unger (2018), and Bond and Gresik (2018).11 Note that marginal costs for the core variety m = 0 are given by v(0, c) = c, which implies that c hf = v hf .…”

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confidence: 99%

Corporate Taxes and Multi-Product Exporters: Theory and Evidence From Trade Dynamics

2019

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This paper analyzes how exporters are affected by corporate tax reforms in destination markets. We introduce tax policy in a trade model of multi-product firms and show that producers face tougher competition in export markets with lower corporate tax rates. This competitive effect induces firms to reduce the number of exported products and to skew their export sales towards the better performing varieties. We estimate the effects of corporate taxes on trade dynamics by exploiting policy reforms in 45 destination countries of exports during the period 2005-2012. Our results provide strong support for competitive effects of corporate taxation.

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Should tax policy favor high- or low-productivity firms?

Cited by 20 publications

References 46 publications

The government whispering to entrepreneurs: Public venture capital, policy shifts, and firm productivity

The government whispering to entrepreneurs: Public venture capital, policy shifts, and firm productivity

Taxing and Subsidizing Foreign Investors

Corporate Taxes and Multi-Product Exporters: Theory and Evidence From Trade Dynamics

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