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

Christiane Clemens and Maik Heinemann ()
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Maik Heinemann: Institute of Economics, University of Lüneburg

No 6, Working Paper Series in Economics from University of Lüneburg, Institute of Economics

Abstract: 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 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, non-linear tax schemes are partly capable of compensating the negative by effects by ex post providing a social insurance.

Keywords: OLG; endogenous growth; entrepreneurship; occupational choice; redistributive taxation (search for similar items in EconPapers)
JEL-codes: D31 E62 O41 P16 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2005-03-17
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Citations: View citations in EconPapers (6)

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Related works:
Journal Article: On the Effects of Redistribution on Growth and Entrepreneurial Risk-taking (2006)
Working Paper: On the Effects of Redistribution on Growth and Entrepreneurial Risk-Taking (2005)
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