Taxation, Innovation and Entrepreneurship

Ulrich Schetter, Hans Gersbach and Maik Schneider

VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order from Verein für Socialpolitik / German Economic Association

Abstract: We examine how basic research should be financed. While basic research is a public good benefiting innovating entrepreneurs it also affects the entire economy: occupational choices of potential entrepreneurs, wages of workers, dividends to shareholders, and aggregate output. We show that the general economy impact of basic research rationalizes a pecking order of taxation to finance basic research. In particular, in a society with desirable dense entrepreneurial activity, a large share of funds for basic research should be financed by labor taxation and a minor share is left to profit taxation. Such tax schemes induce a significant share of agents to become entrepreneurs, thereby rationalizing substantial investments in basic research. These entrepreneurial economies, however, may make a majority of citizens worse off if those individuals do not possess shares of final good producers in the economy. In such circumstances, stagnation may prevail.

JEL-codes: H20 H40 O38 (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-ent, nep-ino, nep-pbe and nep-pub
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Taxation, Innovation and Entrepreneurship (2019)
Working Paper: Taxation, Innovation, and Entrepreneurship (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc13:79776

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