Investigating the Impact of tax evasion and corruption on entrepreneurship: Case study of OECD countries

The main objective of this paper is to investigate the long-term relationship between entrepreneurial activities, tax evasion and corruption using data from 36 OECD member countries during the period of 2000-2010. This research is applied in terms of goal, and descriptive-correlational in terms of data gathering. For this purpose, secondary data used and collected from international reports, which present economic and entrepreneurial indices of countries based on survey data. Data during the period of 2000-2010 are modeled using panel cointegration approach by Eviews 9 software. The results indicate a long-term relationship among the variables. In addition, the results showed that the impact of corruption on all three stages of entrepreneurial Innovation, total entrepreneurship activity and established entrepreneurship was negative. However, the results on the impact of tax evasion on entrepreneurial innovation are positive. Moreover, the results showed that by using the DOLS and FMOLS estimates, tax evasion has a negative effect on the new and established entrepreneurship, while it has a positive impact on the entrepreneurial Innovation. Consequently, if entrepreneurship is one of the main drivers of economic growth, policymakers and the government should simultaneously adopt policies to combat corruption and reduce institutional weaknesses when trying to reduce tax evasion.