This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Risky Earnings, Taxation and Entrepreneurial Choice : A Microeconometric Model for Germany

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Frank M. Fossen

Additional information is available for the following registered author(s):

Abstract

Which role do individual income prospects play in the decision to be an entrepreneur rather than an employee? In a model of occupational choice, higher expected after-tax earnings attract people to self-employment, while more risky net earnings deter risk-averse individuals. In this paper I analyse the expected value and variance of income in self-employment and dependent employment empirically, accounting for selection. Based on this analysis, structural models of self-employment entry and exit under risk are estimated, which include a standard risk aversion parameter. The model predicts that the German income tax reduction of 2000 induced smaller exit rates out of self-employment for men and smaller entry rates for women.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help file. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.diw.de/documents/publikationen/73/60157/dp705.pdf
File Format: application/pdf
File Function:
Download Restriction: no

Publisher Info
Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 705.

Download reference. The following formats are available: HTML, plain text, BibTeX, RIS (EndNote), ReDIF
Length: 35 p.
Date of creation: 2007
Date of revision:
Handle: RePEc:diw:diwwpp:dp705

Contact details of provider:
Postal: Mohrenstra�e 58, D-10117 Berlin
Phone: xx49-30-89789-0
Fax: xx49-30-89789-200
Email:
Web page: http://www.diw.de/english
More information through EDIRC

For technical questions regarding this item, or to correct its listing, contact: (Bibliothek).

Related research
Keywords: Entrepreneurship risk returns to self-employment taxation

Other versions of this item:

Find related papers by JEL classification:
J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation

This paper has been announced in the following NEP Reports:

This item is featured on the following reading lists:
  1. SOEP based publications
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Taylor, Mark P, 1996. "Earnings, Independence or Unemployment: Why Become Self-Employed?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 58(2), pages 253-66, May.
  2. Amemiya, Takeshi, 1981. "Qualitative Response Models: A Survey," Journal of Economic Literature, American Economic Association, vol. 19(4), pages 1483-1536, December. [Downloadable!] (restricted)
  3. Thomas Dohmen & Armin Falk & David Huffman & Uwe Sunde & Jürgen Schupp & Gert G. Wagner, 2005. "Individual Risk Attitudes: New Evidence from a Large, Representative, Experimentally-Validated Survey," IZA Discussion Papers 1730, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  4. Simon C. Parker, 2005. "Entrepreneurship Among Married Couples in the United States: A Simultaneous Probit Approach," IZA Discussion Papers 1712, Institute for the Study of Labor (IZA). [Downloadable!]
  5. Bruce, Donald, 1999. " Do Husbands Matter? Married Women Entering Self-Employment," Small Business Economics, Springer, vol. 13(4), pages 317-29, December. [Downloadable!] (restricted)
  6. Bruce, Donald, 2000. "Effects of the United States tax system on transitions into self-employment," Labour Economics, Elsevier, vol. 7(5), pages 545-574, September. [Downloadable!] (restricted)
  7. Taylor, Mark P, 1999. "Survival of the Fittest? An Analysis of Self-Employment Duration in Britain," Economic Journal, Royal Economic Society, vol. 109(454), pages C140-55, March. [Downloadable!] (restricted)
  8. Roger H. Gordon & Julie Berry Cullen, 2002. "Taxes and Entrepreneurial Activity: Theory and Evidence for the U.S," NBER Working Papers 9015, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  9. Sarah Brown & Lisa Farrel & John Sessions, 2006. "Self-Employment Matching: An Analysis of Dual Earner Couples and Working Households," Small Business Economics, Springer, vol. 26(2), pages 155-172, 03. [Downloadable!] (restricted)
  10. Yannis Georgellis & Howard J. Wall, 2004. "Entrepreneurship and the policy environment," Working Papers 2002-019, Federal Reserve Bank of St. Louis. [Downloadable!]
    Other versions:
  11. Douglas Holtz-Eakin & Harvey Rosen, 2005. "Cash Constraints and Business Start-Ups: Deutschmarks Versus Dollars," Contributions to Economic Analysis & Policy, Berkeley Electronic Press, vol. 4(1), pages 1029-1029. [Downloadable!] (restricted)
  12. Cramer, J. S. & Hartog, J. & Jonker, N. & Van Praag, C. M., 2002. "Low risk aversion encourages the choice for entrepreneurship: an empirical test of a truism," Journal of Economic Behavior & Organization, Elsevier, vol. 48(1), pages 29-36, May. [Downloadable!] (restricted)
  13. Dunn, Thomas & Holtz-Eakin, Douglas, 2000. "Financial Capital, Human Capital, and the Transition to Self-Employment: Evidence from Intergenerational Links," Journal of Labor Economics, University of Chicago Press, vol. 18(2), pages 282-305, April. [Downloadable!] (restricted)
  14. Marco Caliendo & Frank M. Fossen & Alexander S. Kritikos, 2006. "Risk Attitudes of Nascent Entrepreneurs : New Evidence from an Experimentally-Validated Survey," Discussion Papers of DIW Berlin 600, DIW Berlin, German Institute for Economic Research. [Downloadable!]
    Other versions:
  15. Charles A. Holt & Susan K. Laury, 2002. "Risk Aversion and Incentive Effects," American Economic Review, American Economic Association, vol. 92(5), pages 1644-1655, December. [Downloadable!] (restricted)
  16. Evans, David S & Leighton, Linda S, 1989. "Some Empirical Aspects of Entrepreneurship," American Economic Review, American Economic Association, vol. 79(3), pages 519-35, June. [Downloadable!] (restricted)
  17. Frank M. Fossen & Viktor Steiner, 2006. "Income Taxes and Entrepreneurial Choice : Empirical Evidence from Germany," Discussion Papers of DIW Berlin 582, DIW Berlin, German Institute for Economic Research. [Downloadable!]
    Other versions:
  18. Dolton, Peter J & Makepeace, G H, 1990. "Self Employment among Graduates," Bulletin of Economic Research, Blackwell Publishing, vol. 42(1), pages 35-53, January.
  19. Borjas, George J & Bronars, Stephen G, 1989. "Consumer Discrimination and Self-employment," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 581-605, June. [Downloadable!] (restricted)
    Other versions:
  20. William M. Gentry & R. Glenn Hubbard, 2000. "Tax Policy and Entrepreneurial Entry," American Economic Review, American Economic Association, vol. 90(2), pages 283-287, May. [Downloadable!] (restricted)
  21. Stuart Fraser & Francis J. Greene, 2006. "The Effects of Experience on Entrepreneurial Optimism and Uncertainty," Economica, London School of Economics and Political Science, vol. 73(290), pages 169-192, 05. [Downloadable!] (restricted)
  22. Mroz, Thomas A, 1987. "The Sensitivity of an Empirical Model of Married Women's Hours of Work to Economic and Statistical Assumptions," Econometrica, Econometric Society, vol. 55(4), pages 765-99, July. [Downloadable!] (restricted)
    Other versions:
  23. Barton H. Hamilton, 2000. "Does Entrepreneurship Pay? An Empirical Analysis of the Returns to Self-Employment," Journal of Political Economy, University of Chicago Press, vol. 108(3), pages 604-631, June. [Downloadable!] (restricted)
  24. Kihlstrom, Richard E & Laffont, Jean-Jacques, 1979. "A General Equilibrium Entrepreneurial Theory of Firm Formation Based on Risk Aversion," Journal of Political Economy, University of Chicago Press, vol. 87(4), pages 719-48, August. [Downloadable!] (restricted)
  25. Simon C. Parker, 2003. "Does Tax Evasion Affect Occupational Choice?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 65(3), pages 379-394, 07. [Downloadable!] (restricted)
  26. Herb J. Schuetze, . "Taxes, Economic Conditions And Recent Trends in Male Self-Employment: A Canada-U.S. Comparison," Canadian International Labour Network Working Papers 11, McMaster University. [Downloadable!]
    Other versions:
Full references

Statistics
Access and download statistics

Did you know? You can use IDEAS to provide links to papers and articles in your course syllabus.

This page was last updated on 2008-9-5.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.