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Taxation and Self-Employment

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  • Zsofia Barany

    (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique)

Abstract

In this paper I study the relation between self-employment and the tax rates on wages and on self-employment income. Using variation in the statutory tax rates across countries, industries, and occupations, I find that while the share of self-employed is strongly positively correlated with the tax rate on wage income, it is weakly negatively correlated with the tax rate on self-employed income. The asymmetry between the effects of the tax rates suggests that those who choose self-employment partly do so in order to evade taxes. This extensive margin of adjustment – between employment and self-employment – should be taken into account when considering the effects of tax rates on labor income, on taxable income and on welfare.

Suggested Citation

  • Zsofia Barany, 2018. "Taxation and Self-Employment," Working Papers hal-03393144, HAL.
    • Handle: RePEc:hal:wpaper:hal-03393144
    Note: View the original document on HAL open archive server: https://sciencespo.hal.science/hal-03393144
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    References listed on IDEAS

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