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Tax Policy, Venture Capital, and Entrepreneurship
Journal
Journal of Public Economics
ISSN
0047-2727
ISSN-Digital
1879-2316
Type
journal article
Date Issued
2003-01-01
Author(s)
Nielsen, Soren Bo
Abstract
The paper studies the effects of tax policy on venture capital activity. Entrepreneurs pursue a single high risk project each but have no own resources. Financiers provide funds, covering investment cost plus an upfront payment, in exchange for a share in the firm. The contract must include incentives to enlist full effort of entrepreneurs. Venture capitalists also assist with valuable business advice to enhance survival chances. The paper develops a general equilibrium framework with a traditional and an entrepreneurial sector and investigates the effects of taxes on the equilibrium level of managerial advice, entrepreneurship and welfare. It considers differential wage and capital income taxes, a comprehensive income tax, progressive taxation as well as investment and output subsidies to the entrepreneurial sector.
Language
English
Keywords
Entrepreneurship
venture capital
moral hazard
taxes
subsidies.
HSG Classification
not classified
Refereed
No
Publisher
Elsevier
Publisher place
Amsterdam
Volume
87
Number
1
Start page
175
End page
203
Pages
29
Subject(s)
Eprints ID
2129
File(s)