Publication Type
Journal Article
Version
submittedVersion
Publication Date
6-2019
Abstract
We investigate the extent to which uncertainties about tax policies affect business activities. We develop a statewide tax-uncertainty measure (TU measure) and show that it captures state corporate tax uncertainty. By comparing adjacent counties across state borders, we show that increasing tax uncertainty by one standard deviation (a 30% increase in the TU measure) leads to a 0.17% point per-year decrease in the growth rate of establishments over two years. The result holds after conducting a variety of robustness checks and is not likely to be driven by general state-policy uncertainties.
Keywords
Entrepreneurship, State government, Uncertainty
Discipline
Behavioral Economics | Industrial Organization | Taxation
Research Areas
Applied Microeconomics
Publication
Journal of Economic Dynamics and Control
Volume
103
First Page
158
Last Page
184
ISSN
0165-1889
Identifier
10.1016/j.jedc.2018.09.013
Publisher
Elsevier: 24 months
Citation
LEE, Jungho and XU, Jianhuan.
Tax uncertainty and business activity. (2019). Journal of Economic Dynamics and Control. 103, 158-184.
Available at: https://ink.library.smu.edu.sg/soe_research/2275
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.1016/j.jedc.2018.09.013