TY - JOUR

T1 - On the effects of redistribution on growth and entrepreneurial risk-taking

AU - Clemens, Christiane

AU - Heinemann, Maik

PY - 2006/8

Y1 - 2006/8

N2 - This paper investigates the effects of redistributive 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 an 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 can sometimes compensate negative effects by ex post providing social insurance.

AB - This paper investigates the effects of redistributive 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 an 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 can sometimes compensate negative effects by ex post providing social insurance.

KW - Economics

KW - Endogenous growth

KW - Entrepreneurship

KW - Occupational choice

KW - OLG

KW - Redistribution

UR - http://www.scopus.com/inward/record.url?scp=33747140411&partnerID=8YFLogxK

U2 - 10.1007/s00712-006-0191-9

DO - 10.1007/s00712-006-0191-9

M3 - Journal articles

VL - 88

SP - 131

EP - 158

JO - Journal of Economics

JF - Journal of Economics

SN - 0931-8658

IS - 2

ER -