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Working Paper No. 826

Taxation, Labor Market Policy and High-Impact Entrepreneurship

Working Paper
Henrekson, Magnus, Dan Johansson and Mikael Stenkula (2010). “Taxation, Labor Market Policy and High-Impact Entrepreneurship”. IFN Working Paper No. 826. Stockholm: Research Institute of Industrial Economics (IFN).

Magnus Henrekson, Dan Johansson, Mikael Stenkula

Public policy affects the prevalence and performance of both productive and high-impact entrepreneurship. High-impact entrepreneurship prospers when knowledge is successfully generated and exploited in the economy. This process depends on complementary key actors who use their competencies in what we denote a competence bloc. Although variations in economic contexts make prescribing a general panacea impossible, a number of relevant policy areas that affect key actors can be identified. In this paper this is done in the areas of tax policy and labor market policy. It is shown that high and/or distortive taxes and heavy labor market regulations impinge on the creation and functioning of competence blocs, thereby reducing high-impact entrepreneurship.