Sedlacek, P;
Sterk, V;
(2019)
Reviving american entrepreneurship? tax reform and business dynamism.
Journal of Monetary Economics
, 105
pp. 94-108.
10.1016/j.jmoneco.2019.04.009.
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Abstract
The 2017 Tax Cuts and Jobs Act slashed tax rates on business income and introduced immediate expensing of investments. Using a quantitative heterogeneous-firms model, we investigate the long-run effects of such tax reforms on firm dynamics. We find that they can substantially increase business dynamism, potentially offsetting the large decline in the U.S. startup rate observed over recent decades. This result is driven by indirect equilibrium forces: the tax reform stimulates firm entry, leading to an increase in labor demand and wages. Related to this is a large boost of the number of firms and of aggregate output, investment and employment.
| Type: | Article |
|---|---|
| Title: | Reviving american entrepreneurship? tax reform and business dynamism |
| Location: | Pittsburgh, PA |
| Open access status: | An open access version is available from UCL Discovery |
| DOI: | 10.1016/j.jmoneco.2019.04.009 |
| Publisher version: | https://doi.org/10.1016/j.jmoneco.2019.04.009 |
| Language: | English |
| Additional information: | This version is the author accepted manuscript. For information on re-use, please refer to the publisher’s terms and conditions. |
| Keywords: | Taxation, Business dynamism, Aggregate productivity |
| UCL classification: | UCL UCL > Provost and Vice Provost Offices > UCL SLASH UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS > Dept of Economics |
| URI: | https://discovery.ucl.ac.uk/id/eprint/10066671 |
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