Redistribution and Occupational Choice in a Schumpeterian Growth Model

Jean-Francois Wen and Cecilia Garcia-Penalosa

No 1323, CESifo Working Paper Series from CESifo

Abstract: We consider an R&D-driven endogenous growth model in which innovation is risky and agents are risk averse. Growth is determined by the occupational choice of agents who can either work in production for a wage or become entrepreneurs. In this context, we examine the impact of redistributive taxation and compute socially optimal tax rates. Redistribution acts as social insurance, thus encouraging innovation and accelerating growth. The general equilibrium effects of the reallocation of labour induced by taxation can offset the direct distributive impact of taxes and result in a Pareto improvement. Optimal tax rates are a hump-shaped function of the intertemporal spillover effect.

Keywords: growth; innovation; optimal taxation; occupational choice (search for similar items in EconPapers)
JEL-codes: H21 O30 O40 (search for similar items in EconPapers)
Date: 2004
New Economics Papers: this item is included in nep-dev, nep-ent and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_1323

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