Working paper
Can Capital Inflows Stifle Local Entrepreneurship?: Evidence from the Tax Cuts and Jobs Act of 2017
SSRN
04/25/2022
DOI: 10.2139/ssrn.4082335
Abstract
This paper examines the impact of capital inflow on local entrepreneurship. Using the Opportunity Zone policy as a quasi-natural experiment, the paper reveals a dichotomy: capital inflows to economically distressed areas lead to a decline in local entrepreneurship. Motivated by a simple model, I show that increased private investments favor existing firms, discouraging new business formation, particularly in sectors with local competition. Further, the policy negatively affected local employment and was not effective in attracting population inflows or reducing income inequality. Future policy designs should consider potential distributional effects among firms when offering market-based tax incentives.
Details
- Title: Subtitle
- Can Capital Inflows Stifle Local Entrepreneurship?: Evidence from the Tax Cuts and Jobs Act of 2017
- Creators
- Jiajie Xu
- Resource Type
- Working paper
- Publisher
- SSRN
- DOI
- 10.2139/ssrn.4082335
- Number of pages
- 76 pages
- Alternative title
- The Effect of Tax Incentives on Local Private Investments and Entrepreneurship
- Language
- English
- Date posted
- 04/25/2022
- Date updated
- 03/21/2024
- Academic Unit
- Finance
- Record Identifier
- 9984380622002771
Metrics
27 Record Views