IESET.
Hypotheses·fiscal·tax_simplicity_entrepreneurship_panel

Simpler tax systems — measured by fewer tax payments per year, lower time spent on tax compliance, and fewer separate taxes — predict higher entrepreneurship rates (new business registrations per 1,000 working-age adults) and stronger small-firm employment growth over 20-year windows, in a broad-country panel 2000-2020.

The directional claim is that a one- standard-deviation improvement in tax simplicity predicts a 5-15% increase in new business registrations and a 0.5-1.5 percentage point increase in small-firm ( < 50 employees) employment share growth, controlling for overall tax burden, institutional quality, and financial development.

INCONCLUSIVEengine/runs/tax_simplicity_entrepreneurship_panel

INCONCLUSIVE_DATA_PENDING — treatment 'tax_simplicity_index' has no within-country variation under country fixed effects

confidence cueResult card produced; verdict unclassified.

policy briefCoverage too thin

In ordinary language

In plain terms, this asks whether tax simplicity index is actually linked to better or worse new business registrations per 1000 working age from 2000 to 2020.

plain answer

This test cannot make a firm call yet. treatment 'tax_simplicity_index' has no within-country variation under country fixed effects

why it matters

This matters because fiscal claims should change belief only when they survive a pre-declared empirical test.

how the test works

It compares 66 country or place units from 2000 to 2020, using a panel fe design, with fixed effects for country and year.

what was measured
What changed
  • Tax simplicity index
  • Total tax rate
Possible pathway
  • Informal economy share
  • Self employment rate
What we checked
  • New business registrations per 1000 working age
  • Small firm employment share growth
what this does not prove

A single test is not the whole truth. It narrows the claim under a specific sample, time period, and method. Strong policy conclusions need the pattern to survive nearby tests, alternative data, and serious objections.

verification

No evidence packet has been generated yet.

Results

engine/runs/tax_simplicity_entrepreneurship_panel
1007550250200020102020ARGAUSAUTBELBGDBOLBRA
illustrative sketch · run pending
No coefficients yet. When the model fires, this chart will show new_business_registrations_per_1000_working_age across 66 sampled countries over 2000–2020.
The shapes above are stylised — none of the lines are real data.
Placeholder for tax_simplicity_entrepreneurship_panel. Published chart will be generated from engine/runs/tax_simplicity_entrepreneurship_panel/chart_data.json.

Pre-registration

pre-registered
first-spec commit 5ce4495 · 2026-05-02T19:11:20Z
run generated · 2026-06-29T17:52:36Z

Simpler tax systems — measured by fewer tax payments per year, lower time spent on tax compliance, and fewer separate taxes — predict higher entrepreneurship rates (new business registrations per 1,000 working-age adults) and stronger small-firm employment growth over 20-year windows, in a broad-country panel 2000-2020. The directional claim is that a one- standard-deviation improvement in tax simplicity predicts a 5-15% increase in new business registrations and a 0.5-1.5 percentage point increase in small-firm ( < 50 employees) employment share growth, controlling for overall tax burden, institutional quality, and financial development.

Falsification criterion — what would disprove this

set before the run · honoured after

This hypothesis is considered falsified if:

SUPPORTED if β1 (tax simplicity) is positive and significant at p<0.10 for both new business registrations and small-firm employment growth, while β2 (total tax rate) is negative or insignificant. PARTIAL if β1 is positive and significant for registrations but not for small- firm employment (entry without expansion). REFUTED if β1 is negative and significant at p<0.10. INFORMATIVE: the result should survive excluding Georgia and Estonia (dominant tax-simplification cases); if not, it is a two-country story.

formal test & threshold
test:      panel_fe_tax_simplicity_entrepreneurship_20yr
threshold: β_tax_simplicity (registrations) > 0 at p<=0.10  AND β_tax_simplicity (small-firm employment) > 0 at p<=0.10  AND Ex-Georgia-Estonia robustness retains sign of β_tax_simplicity.

Method

Template
panel_fe
Fixed effects
country, year
Clustering
country
Sample
66 countries · 2000 – 2020
Evidence type
associational

Two-way FE panel with 5-year non-overlapping averages to capture medium-run adjustment: entrepreneurship = β0 + β1*tax_simplicity + β2*total_tax_rate + controls + FE. Robustness: (1) exclude small island economies and city-states where tax simplicity may reflect lack of tax base rather than policy design; (2) use PwC Paying Taxes data instead of Doing Business; (3) subsample by income level (frontier vs catch-up); (4) use 20-year cumulative outcomes rather than 5-year averages.

Data

VariableSourceTransform
new_business_registrations_per_1000_working_age
outcome
world_bank_wdi:IC.BUS.NREGtier 2
per_1000_working_age
small_firm_employment_share_growth
outcome
ilo:employment_by_firm_sizetier 2
annual_change_in_share
tax_simplicity_index
treatment
world_bank_db:tax_payments_and_timetier 5
z_score_composite
total_tax_rate
treatment
world_bank_db:total_tax_ratetier 5
level
informal_economy_share
channel
imf:informal_economy_estimatetier 2
level
self_employment_rate
channel
ilo:self_employment_ratetier 2
level
initial_log_gdp_per_capita
control
world_bank_wdi:NY.GDP.PCAP.KDtier 2
log
institutional_quality
control
wgi:RL.ESTtier 4
level
financial_depth
control
world_bank_wdi:GFDD.DI.14tier 2
level
regulatory_quality
control
wgi:RQ.ESTtier 4
level
trade_openness
control
world_bank_wdi:NE.TRD.GNFS.ZStier 2
level

● ready  · ● pending  · ● reconstruct-needed

Detailed result card

Result card — tax_simplicity_entrepreneurship_panel

Verdict: INCONCLUSIVE_DATA_PENDING — treatment 'tax_simplicity_index' has no within-country variation under country fixed effects

Pre-registration

  • Claim: Simpler tax systems — measured by fewer tax payments per year, lower time spent on tax compliance, and fewer separate taxes — predict higher entrepreneurship rates (new business registrations per 1,000 working-age adults) and stronger small-firm employment growth over 20-year windows, in a broad-country panel 2000-2020. The directional claim is that a one- standard-deviation improvement in tax simplicity predicts a 5-15% increase in new business registrations and a 0.5-1.5 percentage point increase in small-firm ( < 50 employees) employment share growth, controlling for overall tax burden, institutional quality, and financial development.
  • Falsification rule: SUPPORTED if β1 (tax simplicity) is positive and significant at p<0.10 for both new business registrations and small-firm employment growth, while β2 (total tax rate) is negative or insignificant. PARTIAL if β1 is positive and significant for registrations but not for small- firm employment (entry without expansion). REFUTED if β1 is negative and significant at p<0.10. INFORMATIVE: the result should survive excluding Georgia and Estonia (dominant tax-simplification cases); if not, it is a two-country story.
  • Falsification test: panel_fe_tax_simplicity_entrepreneurship_20yr

Estimate

  • Error: treatment 'tax_simplicity_index' has no within-country variation under country fixed effects

Variables resolved

  • world_bank_wdi:IC.BUS.NREG → new_business_registrations_per_1000_working_age (outcome, publisher=world_bank_wdi, n=2370)
  • world_bank_db:tax_payments_and_time → tax_simplicity_index (treatment, publisher=constructed, n=1386)
  • world_bank_wdi:NY.GDP.PCAP.KD → initial_log_gdp_per_capita (controls, publisher=world_bank_wdi, n=12104)
  • wgi:RL.EST → institutional_quality (controls, publisher=wgi, n=5296)
  • world_bank_wdi:GFDD.DI.14 → financial_depth (controls, publisher=world_bank_wdi, n=6564)
  • wgi:RQ.EST → regulatory_quality (controls, publisher=wgi, n=5169)
  • world_bank_wdi:NE.TRD.GNFS.ZS → trade_openness (controls, publisher=world_bank_wdi, n=10714)

Variables missing data

  • ilo:employment_by_firm_size (outcome, name=small_firm_employment_share_growth) — vintage not on disk
  • world_bank_db:total_tax_rate (treatment, name=total_tax_rate) — vintage not on disk
  • imf_weo:informal_economy_estimate (decomposition_channels, name=informal_economy_share) — vintage not on disk
  • ilo:self_employment_rate (decomposition_channels, name=self_employment_rate) — vintage not on disk

Generated by scripts/run_panel_fe.py at 2026-06-29T17:52:36+00:00

Strongest opposing argument

Every hypothesis ships with its charitable opposing argument. The framework earns credibility by handling objections at their strongest, not weakest.

Notes

Data readiness: - World Bank Doing Business tax payments, time, total tax rate (ready) - WDI new business registrations, GDP pc, financial depth, trade openness (ready) - WGI RL.EST, RQ.EST (ready) - PwC Paying Taxes data (pending) - ILO employment by firm size, self-employment (pending) - IMF informal economy estimates (ready for subset)

Authored framework. Read the transparency note.