 Flat-Tax Reform with Occupational ChoiceRadim Bohacek () and Jozef Zubricky No 323, 2006 Meeting Papers from Society for Economic Dynamics Abstract: This paper studies the effects of a flat-tax reform in a dynamic, general equilibrium model with heterogeneous agents and occupational choice. Each agent has a choice to be a worker or to establish a firm and become an entrepreneur with a limited ability to borrow in financial markets. Because of limited commitment, whether an agent becomes an entrepreneur depends on his entrepreneurial skill and accumulated assets needed to finance a business project with uncertain returns. Occupational choice allows us to study the intensive margin of production, that is the number and size of firms, as well as the extensive margin, the entry and exit of firms. We also analyze the effect of the progressive tax schedule and the flat-tax reform on efficiency, welfare, inequality, and the political support for the reform. The simulated economy replicates U.S. data on the distribution of wealth and income, and the shares of wealth and income for each occupation. The flat-tax reform has sizeable effects on entrepreneurial activity on both margins Keywords: Taxation; Occupational choice; Heterogeneous agents (search for similar items in EconPapers) There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:red:sed006:323 Access Statistics for this paper More papers in 2006 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC. |
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