nep-ent New Economics Papers
on Entrepreneurship
Issue of 2005‒11‒05
eight papers chosen by
Marcus Dejardin
Facultés Universitaires Notre-Dame de la Paix

  1. The Wealth Tax and Entrepreneurial Activity By Hansson, Åsa
  2. Creating a policy environment for entrepreneurs By Thomas A. Garrett; Howard J. Wall
  3. Capital Structure and Seniority in Entrepreneurial Firms By Filippo Ippolito
  4. Social Capital, Creative Destruction and Economic Growth By Adelina Gschwandtner; Michael A. Hauser
  5. Does the Profit Motive Make Jack Nimble? Ownership Form and the Evolution of the U.S. Hospital Industry By Sujoy Chakravarty; Martin Gaynor; Steven Klepper; William B. Vogt
  6. Knowledge Compensation in the German Automobile Industry By Uwe Cantner; Kristina Dreßler; Jens J. Krüger
  7. Local Learning, Trade Policy and Industrial Structure Dynamics By Facundo Albornoz and Paolo Vanin
  8. Age Structure of the Workforce and Firm Performance By Christian Grund; Niels Westergård-Nielsen

  1. By: Hansson, Åsa (Department of Economics, Lund University)
    Abstract: Entrepreneurship is often credited with generating important positive economic externalities. For example, entrepreneurs are often credited for promoting innovation, discovering new markets, and serving as a mechanism for knowledge spillover. Governments increasingly view encouraging entrepreneurship as an important policy objective. Economists have long studied the determinants of entrepreneurship. Taxation has also been found to be important, in particular income taxes and capital taxes. One form of taxation that has not been considered so far, however, is the wealth tax. The wealth tax is likely to influence entrepreneurship negatively, by affecting the pool of capital available to start up businesses as well as reducing the net return to successful entrepreneurship. This paper illustrates the impact of a tax on wealth on entrepreneurship using a simple model of the choice between becoming an entrepreneur or an employee. Actual data is then used to crudely investigate whether the wealth tax indeed has a measurable effect on self-employment in OECD countries, using increasingly sophisticated techniques. A difference-in-difference type estimator using the abolishment of the wealth tax as a ”natural experiment” points to a consistent pattern of a perceptible, but small impact.
    Keywords: Entrepreneurship; wealth tax; difference-in-difference estimation
    JEL: H24 H31 J23
    Date: 2005–10–19
  2. By: Thomas A. Garrett; Howard J. Wall
    Abstract: This paper demonstrates that levels of entrepreneurship can be greatly affected by the general policy environment. Using a state-level panel, we estimate the effects of several policy variables on rates of entrepreneurship and find that bankruptcy exemptions, corporate tax rates, and the level of the minimum wage all affect a state's rate of entrepreneurship. For the median state, these policies reduced the level of entrepreneurship by 10.5 percent. Much of the geographic pattern of entrepreneurship can be explained by policy differences: The low-entrepreneurship states of the Great Lakes and the South tend to have relatively unfriendly policy environments, and the high-entrepreneurship states of the West tend to have relatively friendly policies. On the other hand, although New England states tend to have relatively unfriendly policy environments, they also tend to have high rates of entrepreneurship.
    Date: 2005
  3. By: Filippo Ippolito
    Abstract: We present a model of cash constrained entrepreneurs who need an investor to finance their project. Investors can either be uninformed, such as individual bondholders, or informed, such as venture capitalists and banks. There is an entrepreneurial moral hazard problem, which can be partially overcome through monitoring only by informed investors. However, monitoring is only effective if investors can commit ex ante to liquidate the project after observing a poor signal. We show that a capital structure that minimizes commitment and information costs requires informed investors to hold senior convertible debt, uninformed investors to hold junior debt and entrepreneurs to hold common stock.
    JEL: G21 G24 G32 G33
    Date: 2005
  4. By: Adelina Gschwandtner; Michael A. Hauser
    Abstract: The dynamic structure of profit rates for 156 US manufacturing companies is analyzed by means of fractional integration techniques as an alternative to the commolny used ARMIA models with respect to the "persistence of profits". The results show - despite the short lengths of the series - that 35,5% of the series have long range dependence and 54% are nonstationary. This is a confirmation of the strong challenge to the competitive environment hypothesis obtained by previous studies.
    JEL: L00 C22
    Date: 2005–07
  5. By: Sujoy Chakravarty; Martin Gaynor; Steven Klepper; William B. Vogt
    Abstract: We examine the evolving structure of the U.S. hospital industry since 1970, focusing on how ownership form influences entry and exit behavior. We develop theoretical predictions based on the model of Lakdawalla and Philipson, in which for-profit and not-for-profit hospitals differ regarding their objectives and costs of capital. The model predicts for-profits would be quicker to enter and exit than not-for-profits in response to changing market conditions. We test this hypothesis using data for all U.S. hospitals from 1984 through 2000. Examining annual and regional entry and exit rates, for-profit hospitals consistently have higher entry and exit rates than not-for-profits. Econometric modeling of entry and exit rates yields similar patterns. Estimates of an ordered probit model of entry indicate that entry is more responsive to demand changes for for-profit than not-for-profit hospitals. Estimates of a discrete hazard model for exit similarly indicate that negative demand shifts increase the probability of exit more for for-profits than not-for-profits. Finally, membership in a hospital chain significantly decreases the probability of exit for for-profits, but not not-for-profits.
    JEL: I11 L11 L2 L3
    Date: 2005–10
  6. By: Uwe Cantner (University of Jena, Faculty of Economics); Kristina Dreßler (University of Jena, Faculty of Economics); Jens J. Krüger (University of Jena, Faculty of Economics)
    Abstract: Knowledge is one of the most important determinants in single-industry studies of firm survival over the life cycle. Different kinds of knowledge, namely post-entry experience, pre-entry experience, and knowledge acquired by innovative activity positively influence the survival chances of firms. This paper investigates how the kinds of knowledge are able to compensate for each other. Therefore, a statistical survival analysis is performed for the German automobile industry which applies a new approach that combines the Cox regression with instrumental variable estimation. The results show that innovative activity is able to compensate for lacking post-entry experience, supporting Schumpeterian creative destruction.
    Keywords: firm survival, patents, innovation, automobile industry, hazard rates
    JEL: L10 L62 O33 C41
    Date: 2005–09–26
  7. By: Facundo Albornoz and Paolo Vanin
    Abstract: In a small open economy with heterogeneous firms, in which tariffs determine the mass of active firms, free trade optimality depends positively on the level of firm heterogeneity and negatively on transportation costs. The benefits from temporary protection depend on the level of backwardness: for a given mass of backward firms, the relative gains from protection increase with their quality and decrease with the quality of advanced firms; for given production quality levels, the relative advantage of protection increases with the mass of backward firms.
    Keywords: Production network, Learning externalities, Infant industry
    JEL: D51 D62 F12 F13
    Date: 2005–09
  8. By: Christian Grund (University of Bonn, RWTH Aachen, CCP and IZA Bonn); Niels Westergård-Nielsen (CCP, Aarhus School of Business and IZA Bonn)
    Abstract: In this contribution, we examine the interrelation between corporate age structures and firm performance. In particular, we address the issues, whether firms with young rather than older employees are successful and whether firms with homogeneous or heterogeneous workforces are doing well. Several theoretical approaches are discussed with respect to these questions and divergent hypotheses are derived. Using Danish linked employeremployee data, we find that both mean age and dispersion of age in firms are inversely ushaped related to firm performance.
    Keywords: firm performance, corporate age structures, demographic change
    JEL: M54 J21 L25
    Date: 2005–10

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