Small Business Economics

, Volume 47, Issue 1, pp 201–216 | Cite as

Taxes, corruption, and entry

  • Maksim Belitski
  • Farzana Chowdhury
  • Sameeksha Desai


Tax policies and corruption are important institutional considerations which can shape entrepreneurship. We investigate how tax rates, and the interaction between corruption and tax rates, influence variations in entry across a panel of 72 countries in the period 2005–2011. We use a series of panel estimations as well as several robustness checks to test these effects, using relevant controls for economic development, the size of the state, and other regulatory and tax policy measures. We find that higher tax rates consistently discourage entry. Further, we find that although the direct influence of corruption on entry is also consistently negative, the interaction influence of corruption and tax rate is positive. This indicates that corruption can offset the negative influence of high taxes on entry. We discuss the implications of our findings for policymakers and future research.


Corporate tax Tax administration Entrepreneurship Corruption Institution 

JEL Classifications

L26 H29 O50 



We thank David Audretsch, Johan Eklund, Magnus Henrekson, and participants at Academy of International Business for comments. Farzana Chowdhury thanks Erik Stam and Siri Terjesen.


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Copyright information

© Springer Science+Business Media New York 2016

Authors and Affiliations

  • Maksim Belitski
    • 1
  • Farzana Chowdhury
    • 2
  • Sameeksha Desai
    • 2
  1. 1.Henley Business SchoolWhiteknights, University of ReadingReadingUK
  2. 2.Institute for Development Strategies, School of Public and Environmental AffairsIndiana UniversityBloomingtonUSA

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