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On the Effects of Redistribution on Growth and Entrepreneurial Risk-taking

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  • Christiane Clemens

    ()

  • Maik Heinemann

    ()

Abstract

This paper investigates the redistributive effects of taxation on occupational choice and growth. We discuss a two-sector economy in the spirit of Romer (1990). Agents engage in one of two alternative occupations: either self-employment in an intermediate goods sector characterized by monopolistic competition, or employment as ordinary worker in this sector. Entrepreneurial profits are stochastic. The occupational choice under risk endogenizes the number of firms in the intermediate goods industry. While the presence of entrepreneurial risk results in a suboptimally low number of firms and depresses growth, nonlinear tax schemes are capable of compensating the negative byeffects by ex post providing a social insurance

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Bibliographic Info

Article provided by Springer in its journal Journal of Economics.

Volume (Year): 88 (2006)
Issue (Month): 2 (08)
Pages: 131-158

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Handle: RePEc:kap:jeczfn:v:88:y:2006:i:2:p:131-158

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Web page: http://www.springerlink.com/link.asp?id=108909

Related research

Keywords: OLG; endogenous growth; entrepreneurship; occupational choice; redistribution; D31; E62; O41; P16; J21;

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References

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Citations

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Cited by:
  1. Christiane Clemens & Maik Heinemann, 2013. "The Effects of International Financial Integration in a Model with Heterogeneous Firms and Credit Frictions," CESifo Working Paper Series 4441, CESifo Group Munich.
  2. Vincenzo Quadrini, 2009. "Entrepreneurship in macroeconomics," Annals of Finance, Springer, vol. 5(3), pages 295-311, June.
  3. Maik Heinemann & Christiane Clemens, 2007. "Credit Constraints, Entrepreneurial Activity, and Occupational Choice under Risk," 2007 Meeting Papers, Society for Economic Dynamics 416, Society for Economic Dynamics.
  4. Jean-Francois Wen & Daniel V. Gordon, 2014. "An Empirical Model of Tax Convexity and Self-Employment," Working Papers 2014-33, Department of Economics, University of Calgary, revised 03 Feb 2014.
  5. Christiane Clemens, 2008. "Imperfect Competition and Growth with Entrepreneurial Risk," German Economic Review, Verein für Socialpolitik, Verein für Socialpolitik, vol. 9, pages 180-206, 05.
  6. Ingrid Ott & Susanne Soretz, 2006. "Governmental activity and private capital adjustment," Working Paper Series in Economics 26, University of Lüneburg, Institute of Economics.
  7. Sahana Roy Chowdhury, 2013. "Wealth inequality, entrepreneurship and industrialization," Journal of Economics, Springer, Springer, vol. 108(1), pages 81-102, January.
  8. Christiane Clemens & Maik Heinemann, 2008. "On Entrepreneurial Risk–Taking and the Macroeconomic Effects of Financial Constraints," Working Paper Series in Economics 103, University of Lüneburg, Institute of Economics.
  9. Ingrid Ott & Susanne Soretz, 2006. "Nachhaltige Entwicklung durch endogeneUmweltwahrnehmung," Working Paper Series in Economics 24, University of Lüneburg, Institute of Economics.

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