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On the Effects of Redistribution on Growth and Entrepreneurial Risk-taking

  • Christiane Clemens

    ()

  • Maik Heinemann

    ()

This paper investigates the redistributive effects of taxation on occupational choice and growth. We discuss a twoñsector economy in the spirit of Romer (1990). Agents engage in one of two alternative occupations: either selfñemployment in an intermediate goods sector characterized by monopolistic competition, or employment as an ordinary worker in this sector. Entrepreneurial prots are stochastic. The occupational choice under risk endogenizes the number of rms in the intermediate goods industry. While the presence of entrepreneurial risk results in a suboptimally low number of rms and depresses growth, nonñlinear tax schemes are partly capable of compensating the negative by effects by ex post providing a social insurance.

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File URL: http://hdl.handle.net/10.1007/s00712-006-0191-9
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Article provided by Springer in its journal Journal of Economics.

Volume (Year): 88 (2006)
Issue (Month): 2 (08)
Pages: 131-158

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Handle: RePEc:kap:jeczfn:v:88:y:2006:i:2:p:131-158
Contact details of provider: Web page: http://www.springerlink.com/link.asp?id=108909

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  1. Roland Benabou, 1996. "Inequality and Growth," NBER Working Papers 5658, National Bureau of Economic Research, Inc.
  2. Clemens, Christiane, 2004. "Entrepreneurship and Growth - An Overlapping Generations Approach -," Hannover Economic Papers (HEP) dp-304, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
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  8. Spence, Michael, 1976. "Product Selection, Fixed Costs, and Monopolistic Competition," Review of Economic Studies, Wiley Blackwell, vol. 43(2), pages 217-35, June.
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  13. John Heaton & Deborah Lucas, 2000. "Portfolio Choice and Asset Prices: The Importance of Entrepreneurial Risk," Journal of Finance, American Finance Association, vol. 55(3), pages 1163-1198, 06.
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  18. repec:dgr:uvatin:20000095 is not listed on IDEAS
  19. Varian, Hal R., 1980. "Redistributive taxation as social insurance," Journal of Public Economics, Elsevier, vol. 14(1), pages 49-68, August.
  20. Feldstein, Martin S, 1969. "The Effects on Taxation on Risk Taking," Journal of Political Economy, University of Chicago Press, vol. 77(5), pages 755-64, Sept./Oct.
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  22. Quadrini, Vincenzo, 1999. "The Importance of Entrepreneurship for Wealth Concentration and Mobility," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 45(1), pages 1-19, March.
  23. Tobias J. Moskowitz & Annette Vissing-Jørgensen, 2002. "The Returns to Entrepreneurial Investment: A Private Equity Premium Puzzle?," American Economic Review, American Economic Association, vol. 92(4), pages 745-778, September.
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