Taxation of Small Firms under Uncertainty - A Real Option View of Firm Creation
AbstractThis paper addresses the impact of the tax system on the incentives to become self-employed. The new approach here is that the creation of a firm is assumed to be an opportunity but not an obligation, that is, a real option. A comprehensive income tax system and a "dual" tax system of the Nordic type are compared. The comprehensive system Yields a higher threshold with respect to creating a firm than the dual system. Swedish data on disposable income for different socio-economic groups are used to evaluate the relevance of the critical assumptions in the model and to find parameter estimates. A result is that the assumptions are consistent with data for white-collar labor but not for blue-collar labor.
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Bibliographic InfoPaper provided by Stockholm University, Department of Economics in its series Research Papers in Economics with number 1999:17.
Length: 33 pages
Date of creation: 01 Nov 1999
Date of revision:
Contact details of provider:
Postal: Department of Economics, Stockholm, S-106 91 Stockholm, Sweden
Phone: +46 8 16 20 00
Fax: +46 8 16 14 25
Web page: http://www.ne.su.se/
More information through EDIRC
income tax; firm creation; occupational choice; real option;
Find related papers by JEL classification:
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
- J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
This paper has been announced in the following NEP Reports:
- NEP-ALL-2000-02-07 (All new papers)
- NEP-PBE-2000-02-07 (Public Economics)
- NEP-PUB-2000-02-07 (Public Finance)
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