Scandinavian Working Papers in Economics

Working Papers,
Copenhagen Business School, Department of Economics

No 15-2006: Public Policy for Start-up Entrepreneurship with Venture Capital and Bank Finance

Søren Bo Nielsen and Christian Keuschnigg
Additional contact information
Søren Bo Nielsen: Department of Economics, Copenhagen Business School, Postal: Department of Economics, Copenhagen Business School, Solbjerg Plads 3 C, 5. sal, DK-2000 Frederiksberg, Denmark
Christian Keuschnigg: Department of Economics, Copenhagen Business School, Postal: Department of Economics, Copenhagen Business School, Solbjerg Plads 3 C, 5. sal, DK-2000 Frederiksberg, Denmark

Abstract: In recent years, venture capital has become an important source for nancing young entrepreneurial rms. Given the apparently more innovative nature and extra value added of venture capital backed rms compared to other firms, policy makers have taken an increasing interest in an active venture capital industry. We explore how selected policy instruments determine the incentives of individuals to start up new rms and of venture capitalists to nance and advise them, and how policy thereby influences the size and nature of the industry and how it aspects aggregate welfare. We examine the impact of wage and corporate income taxes as well as capital gains taxes and start-up capital subsidies on the volume and quality of venture capital backed entrepreneurship. JEL-Classi cation: D82, G24, H24, H25 Keywords: Entrepreneurship, venture capital, double moral hazard, taxes, sub-sidies.

Keywords: na

JEL-codes: G10

43 pages, January 1, 2006

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