Tax Progressivity and Self-Employment Dynamics

Wiji Arulampalam and Andrea Papini

The Review of Economics and Statistics, 2023, vol. 105, issue 2, 376-391

Abstract: Analysis of the relationship between taxes and self-employment should account for the interplay between responses in self-employment and wage employment. To this end, we estimate a two-state multispell duration model which accounts for both observed and unobserved heterogeneity using a large longitudinal administrative data set for Norway for 1993 to 2011. Our findings confirm theoretical predictions and are robust to various changes to definitions and sample selections. A policy experiment simulating a flatter tax schedule in the year 2000 is found to encourage self-employment, delivering a net increase of predicted inflow into self-employment from 2.8

Date: 2023
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https://doi.org/10.1162/rest_a_01046

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Working Paper: Tax Progressivity and Self-employment Dynamics (2021)
Working Paper: Tax Progressivity and Self-Employment Dynamics (2021)
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