Collateral Value and Entrepreneurship: Evidence from a Property Tax Reform

31 Pages Posted: 23 Mar 2020

See all articles by Miguel A. Ferreira

Miguel A. Ferreira

Nova School of Business and Economics; European Corporate Governance Institute (ECGI); Centre for Economic Policy Research (CEPR)

João Pereira dos Santos

New University of Lisbon - Nova School of Business and Economics

Ana Venâncio

ISEG Lisbon School of Economics and Management,Universidade de Lisboa

Date Written: December 3, 2019

Abstract

We study the role of property taxes on entrepreneurial activity using a quasi-natural experiment, which unexpectedly reduced the upper bound of the Portuguese property tax rate for urban properties in 2008. Using a difference-in-differences approach, we find that treated municipalities (i.e., municipalities that had a property tax rate above the new upper bound) experienced higher entry rates in the manufacturing sector vis-a-vis control municipalities (i.e., municipalities that had a property tax rate at or below the new upper bound). Taking advantage of firm-level data, we show that start-ups created as a response to the decrease in property taxes in treated municipalities use more debt, invest more, and are more likely to survive.

Keywords: Entrepreneurship, Property taxes, Real estate collateral, Savings

JEL Classification: L26, H20, R30

Suggested Citation

Ferreira, Miguel Almeida and Pereira dos Santos, João and Venâncio, Ana, Collateral Value and Entrepreneurship: Evidence from a Property Tax Reform (December 3, 2019). Available at SSRN: https://ssrn.com/abstract=3544706 or http://dx.doi.org/10.2139/ssrn.3544706

Miguel Almeida Ferreira (Contact Author)

Nova School of Business and Economics ( email )

Campus de Campolide
Lisbon, 1099-032
Portugal

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

João Pereira dos Santos

New University of Lisbon - Nova School of Business and Economics ( email )

Campus de Campolide
Lisbon, 1099-032
Portugal

Ana Venâncio

ISEG Lisbon School of Economics and Management,Universidade de Lisboa ( email )

Rua do Quelhas 6
LISBOA, 1200-781
Portugal

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