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Taxation and Entrepreneurship in a Welfare State

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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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  • Stenkula, Mikael, 2009. "Taxation and Entrepreneurship in a Welfare State," Working Paper Series 800, Research Institute of Industrial Economics.
    • Handle: RePEc:hhs:iuiwop:0800
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    Cited by:

    1. Petutschnig, Matthias, 2017. "Future orientation and taxes: Evidence from big data," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 29(C), pages 14-31.
    2. Mina Baliamoune-Lutz & Pierre Garello, 2014. "Tax structure and entrepreneurship," Small Business Economics, Springer, vol. 42(1), pages 165-190, January.
    3. Henrekson, Magnus & Stenkula, Mikael, 2009. "Entrepreneurship and Public Policy," Working Paper Series 804, Research Institute of Industrial Economics.
    4. Mikael Stenkula, 2012. "Taxation and entrepreneurship in a welfare state," Small Business Economics, Springer, vol. 39(1), pages 77-97, July.
    5. Yusra H. M. Babiker & Elfadil Timan & Malik Elnaeem Mohammed Ali, 2023. "The Influence of Government Policies and Economic Factors on the Growth of Entrepreneurial Activities in Khartoum, Sudan," Business and Economic Research, Macrothink Institute, vol. 13(2), pages 53-73, December.
    6. Niklas Elert, 2014. "What determines entry? Evidence from Sweden," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 53(1), pages 55-92, August.
    7. Argilés-Bosch, Josep Mª & Ravenda, Diego & Garcia-Blandón, Josep, 2021. "E-commerce and labour tax avoidance," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 81(C).
    8. Orkhan Nadirov & Bruce Dehning, 2020. "Tax Progressivity and Entrepreneurial Dynamics," Sustainability, MDPI, vol. 12(9), pages 1-21, April.
    9. Bruce, Donald & Gurley-Calvez, Tami J. & Norwood, Alex, 2020. "Entrepreneurship as Trust," Foundations and Trends(R) in Entrepreneurship, now publishers, vol. 16(5), pages 393-443, April.
    10. Dilli, Selin & Elert, Niklas, 2016. "The Diversity of Entrepreneurial Regimes in Europe," Working Paper Series 1118, Research Institute of Industrial Economics.
    11. Ioana Maria Costea, 2012. "Labour Taxation: Formal And Informal Solutions," Perspectives of Law and Public Administration, Societatea de Stiinte Juridice si Administrative (Society of Juridical and Administrative Sciences), vol. 1(1), pages 320-331, December.
    12. Gordon, Roger & Sarada,, 2018. "How should taxes be designed to encourage entrepreneurship?," Journal of Public Economics, Elsevier, vol. 166(C), pages 1-11.
    13. Andrea Asoni & Tino Sanandaji, 2014. "Taxation and the quality of entrepreneurship," Journal of Economics, Springer, vol. 113(2), pages 101-123, October.
    14. Bradley Heim & Ithai Lurie, 2014. "Does health reform affect self-employment? Evidence from Massachusetts," Small Business Economics, Springer, vol. 43(4), pages 917-930, December.
    15. Hoch, Felix & Lohwasser, Todor S., 2019. "The influence of institutions on venture capital: How transaction costs, uncertainty, and change affect new ventures," Discussion Papers of the Institute for Organisational Economics 9/2019, University of Münster, Institute for Organisational Economics.

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    Keywords

    Entrepreneurship; Self-employment; Taxation; Welfare state;
    All these keywords.

    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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