Resource title

Risky earnings, taxation and entrepreneurial choice: a microeconometric model for Germany

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Resource description

Which role do individual income prospects play in the decision to be an entrepreneur rather than an employee? In a model of occupational choice, higher expected after-tax earnings attract people to self-employment, while more risky net earnings deter risk-averse individuals. In this paper I analyse the expected value and variance of income in self-employment and dependent employment empirically, accounting for selection. Based on this analysis, structural models of self-employment entry and exit under risk are estimated, which include a standard risk aversion parameter. The model predicts that the German income tax reduction of 2000 induced smaller exit rates out of self-employment for men and smaller entry rates for women.

Resource author

Frank M. Fossen

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Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/27230

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Adapt according to the presented license agreement and reference the original author.