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Risk, Self-Employment and Differential Income Taxation

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  • Parker, Simon C

Abstract

Previous research has identified non-diversifiable risk and a preference for "being one's own boss" as key determinants of participation in self-employment. Using a simple model of occupational choice, I show how both factors can cause efficiency losses in a free market economy, and how linear differential occupational taxation can improve on the market outcome. A simulation exercise calibrated with UK data advocates a tax premium on employment incomes and a tax cut for the self-employed, in order to generate an efficiency gain of around a third of one per cent of GDP. Copyright 2001 by Blackwell Publishers Ltd and The Victoria University of Manchester

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  • Parker, Simon C, 2001. "Risk, Self-Employment and Differential Income Taxation," Manchester School, University of Manchester, vol. 69(1), pages 1-15, January.
  • Handle: RePEc:bla:manchs:v:69:y:2001:i:1:p:1-15
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    Cited by:

    1. Ruta Aidis & Mirjam van Praag, 2004. "Illegal Entrepreneurship Experience," Tinbergen Institute Discussion Papers 04-105/3, Tinbergen Institute.

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