Score contribution per author:
α: calibrated so average coauthorship-adjusted count equals average raw count
The 2017 Tax Cuts and Jobs Act slashed tax rates on business income and introduced immediate expensing of investments. Using a quantitative heterogeneous-firms model, we investigate the long-run effects of such tax reforms on firm dynamics. We find that they can substantially increase business dynamism, potentially offsetting the large decline in the U.S. startup rate observed over recent decades. This result is driven by indirect equilibrium forces: the tax reform stimulates firm entry, leading to an increase in labor demand and wages. Related to this is a large boost of the number of firms and of aggregate output, investment and employment.