Roehrs, Johanna (2023) Income taxation and job creation. MACROECONOMIC DYNAMICS, 27 (8). pp. 2056-2085. ISSN 1365-1005, 1469-8056
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This paper augments the DMP model with large firms and intrafirm wage bargaining by an endogenous decision to become an entrepreneur that is based on heterogeneous entrepreneurial abilities. If workers' wage bargaining power is not too large and the match efficiency is not too low, the decentralized market equilibrium features an inefficiently high number of entrepreneurs, because they appropriate large parts of the surplus from matches. A realistic calibration with empirically plausible parameters shows this case to be the relevant one. Consequently, introducing a tax on the profits of entrepreneurs restores the constrained first-best allocation by affecting occupational choices. It drives rather unproductive entrepreneurs out of the market since the marginal entrepreneur is affected and not the average one. Thus, the negative effects on job creation are small.
| Item Type: | Article |
|---|---|
| Uncontrolled Keywords: | SEARCH; ENTREPRENEURSHIP; UNEMPLOYMENT; EFFICIENCY; MARKET; Optimal taxation; imperfect labor markets; job creation; entrepreneurship |
| Subjects: | 300 Social sciences > 330 Economics |
| Divisions: | Business, Economics and Information Systems > Institut für Volkswirtschaftslehre und Ökonometrie > Economics of the Public SectorWirtschaftspolitik (Professor Dr. Fabian Kindermann) |
| Depositing User: | Dr. Gernot Deinzer |
| Date Deposited: | 21 Feb 2024 07:24 |
| Last Modified: | 21 Feb 2024 07:24 |
| URI: | https://pred.uni-regensburg.de/id/eprint/58873 |
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