Redistribution and Occupational Choice in a Schumpeterian Growth Model
AbstractWe consider an R&D-driven endogenous growth model in which innovation is risky and agents are risk averse. Growth is determined by the occupational choice of agents who can either work in production for a wage or become entrepreneurs. In this context, we examine the impact of redistributive taxation and compute socially optimal tax rates. Redistribution acts as social insurance, thus encouraging innovation and accelerating growth. The general equilibrium effects of the reallocation of labour induced by taxation can offset the direct distributive impact of taxes and result in a Pareto improvement. Optimal tax rates are a hump-shaped function of the intertemporal spillover effect.
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Bibliographic InfoPaper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1323.
Date of creation: 2004
Date of revision:
growth; innovation; optimal taxation; occupational choice;
Find related papers by JEL classification:
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- O30 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - General
- O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-11-22 (All new papers)
- NEP-DEV-2004-11-22 (Development)
- NEP-ENT-2004-11-22 (Entrepreneurship)
- NEP-PBE-2004-11-22 (Public Economics)
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