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Investor Tax Credits and Entrepreneurship: Evidence from U.S. States / Matthew R. Denes, Sabrina T. Howell, Filippo Mezzanotti, Xinxin Wang, Ting Xu.
- Format:
- Book
- Author/Creator:
- Denes, Matthew R.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w27751.
- NBER working paper series no. w27751
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2020.
- Summary:
- Angel investor tax credits are used globally to spur high-growth entrepreneurship. Exploiting their staggered implementation in 31 U.S. states, we find that they increase angel investment yet have no significant impact on entrepreneurial activity. Two mechanisms explain these results: Crowding out of alternative financing and low sensitivity of professional investors to tax credits. With a large-scale survey and a stylized model, we show that low responsiveness among professional angels may reflect the fat-tailed return distributions that characterize high-growth startups. The results contrast with evidence that direct subsidies to firms have positive effects, raising concerns about promoting entrepreneurship with investor subsidies.
- Notes:
- Print version record
- August 2020.
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