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Taxation and Entrepreneurship in a Welfare State

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  • Stenkula, Mikael

    ()
    (Research Institute of Industrial Economics (IFN))

Abstract

Does tax policy affect the rate of self-employment in a modern welfare state? This question is analyzed empirically based on Swedish data for the entire post-war period. Available tax data indicate that payroll taxes have had a negative influence on the unincorporated rate of self-employment, though the effect is modest. No effects from regular labor income taxation or capital gains taxation are found. The paper improves upon earlier studies in that it tries to separate the effects of different taxes, and uses cointegration techniques. A further extension is that it studies a Scandinavian high-tax welfare state. Earlier time-series studies analyzing self-employment and taxation have with few exceptions been based on data from countries with relatively low tax levels and less comprehensive welfare systems, notably the US and the UK.

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Bibliographic Info

Paper provided by Research Institute of Industrial Economics in its series Working Paper Series with number 800.

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Length: 38 pages
Date of creation: 10 Jun 2009
Date of revision:
Publication status: Forthcoming as Stenkula, Mikael, 'Taxation and Entrepreneurship in a Welfare State' in Small Business Economics .
Handle: RePEc:hhs:iuiwop:0800

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Postal: Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden
Phone: +46 8 665 4500
Fax: +46 8 665 4599
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Web page: http://www.ifn.se/
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Keywords: Entrepreneurship; Self-employment; Taxation; Welfare state;

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References

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  1. Donald Bruce & Mohammed Mohsin, 2006. "Tax Policy and Entrepreneurship: New Time Series Evidence," Small Business Economics, Springer, vol. 26(5), pages 409-425, 06.
  2. Henrekson, Magnus, 2002. "Entrepreneurship: A Weak Link in the Welfare State," Working Paper Series in Economics and Finance 518, Stockholm School of Economics, revised 04 Mar 2005.
  3. 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.
  4. Simon C. Parker & Martin T. Robson, 2004. "Explaining International Variations in Self-Employment: Evidence from a Panel of OECD Countries," Southern Economic Journal, Southern Economic Association, vol. 71(2), pages 287-301, October.
  5. Martin T. Robson & Colin Wren, 1999. "Marginal and Average Tax Rates and the Incentive for Self-Employment," Southern Economic Journal, Southern Economic Association, vol. 65(4), pages 757-773, April.
  6. Lindquist, Matthew J. & Vilhelmsson, Roger, 2004. "Is the Swedish Central Government a Wage Leader?," Working Paper Series 8/2004, Swedish Institute for Social Research.
  7. R. Glenn Hubbard & William M. Gentry, 2000. "Tax Policy and Entrepreneurial Entry," American Economic Review, American Economic Association, vol. 90(2), pages 283-287, May.
  8. David G. Blanchflower, 2000. "Self-Employment in OECD Countries," NBER Working Papers 7486, National Bureau of Economic Research, Inc.
  9. Davidsson, Per & Henrekson, Magnus, 2002. " Determinants of the Prevalence of Start-Ups and High-Growth Firms," Small Business Economics, Springer, vol. 19(2), pages 81-104, September.
  10. Parker, Simon C, 1996. "A Time Series Model of Self-Employment under Uncertainty," Economica, London School of Economics and Political Science, vol. 63(251), pages 459-75, August.
  11. Ilmakunnas, P. & Kanniainen, V. & Lammi, U., 1999. "Entrepreneurship, Economic Risks, and Risk-Insurance in the Welfare State," University of Helsinki, Department of Economics 453, Department of Economics.
  12. Hansson, Åsa, 2008. "Income taxes and the probability to become self-employed: The case of Sweden," Ratio Working Papers 122, The Ratio Institute.
  13. Robert W. Fairlie & Bruce D. Meyer, 2000. "Trends in Self-Employment among White and Black Men during the Twentieth Century," Journal of Human Resources, University of Wisconsin Press, vol. 35(4), pages 643-669.
  14. Blau, David M, 1987. "A Time-Series Analysis of Self-employment in the United State," Journal of Political Economy, University of Chicago Press, vol. 95(3), pages 445-67, June.
  15. Kihlstrom, Richard E. & Laffont, Jean-Jacques, 1983. "Taxation and risk taking in general equilibrium models with free entry," Journal of Public Economics, Elsevier, vol. 21(2), pages 159-181, July.
  16. Henrekson, Magnus & Johansson, Dan, 2008. "Competencies and Institutions Fostering High-growth Firms," Working Paper Series 757, Research Institute of Industrial Economics.
  17. Hansson, Åsa, 2005. "The Wealth Tax and Entrepreneurial Activity," Working Papers 2005:43, Lund University, Department of Economics.
  18. Bruce, Donald, 2002. "Taxes and Entrepreneurial Endurance: Evidence from the Self-Employed," National Tax Journal, National Tax Association, vol. 55(N. 1), pages 5-24, March Cit.
  19. Cullen, Julie Berry & Gordon, Roger H., 2007. "Taxes and entrepreneurial risk-taking: Theory and evidence for the U.S," Journal of Public Economics, Elsevier, vol. 91(7-8), pages 1479-1505, August.
  20. 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.
  21. Cowling, Marc & Mitchell, Peter, 1997. "The Evolution of U.K. Self-Employment: A Study of Government Policy and the Role of the Macroeconomy," The Manchester School of Economic & Social Studies, University of Manchester, vol. 65(4), pages 427-42, September.
  22. Kevin Moore, 2004. "The effects of the 1986 and 1993 tax reforms on self-employment," Finance and Economics Discussion Series 2004-05, Board of Governors of the Federal Reserve System (U.S.).
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Citations

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Cited by:
  1. Henrekson, Magnus & Stenkula, Mikael, 2009. "Entrepreneurship and Public Policy," Working Paper Series 804, Research Institute of Industrial Economics.
  2. Mina Baliamoune-Lutz & Pierre Garello, 2011. "Tax Structure and Entrepreneurship," CAE Working Papers 94, Aix-Marseille Université, CERGAM.
  3. Ioana Maria Costea, 2012. "Labour Taxation: Formal And Informal Solutions," "Perspectives of Business Law” Journal, Societatea de Stiinte Juridice si Administrative (Society of Juridical and Administrative Sciences), vol. 1(1), pages 320-331, December.

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