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

  • Maik Heinemann
  • Christiane Clemens

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

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Paper provided by Society for Computational Economics in its series Computing in Economics and Finance 2005 with number 275.

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Date of creation: 11 Nov 2005
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Handle: RePEc:sce:scecf5:275
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  8. Sinn, Hans-Werner, 1996. "Social Insurance, Incentives and Risk Taking," Munich Reprints in Economics 19834, University of Munich, Department of Economics.
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  19. Clemens, Christiane, 2004. "Entrepreneurship and Growth - An Overlapping Generations Approach -," Hannover Economic Papers (HEP) dp-304, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
  20. Roland Bénabou, 1996. "Inequality and Growth," NBER Chapters, in: NBER Macroeconomics Annual 1996, Volume 11, pages 11-92 National Bureau of Economic Research, Inc.
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  22. 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.
  23. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth Through Creative Destruction," Scholarly Articles 12490578, Harvard University Department of Economics.
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  26. 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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