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Title:Redistribution and occupational choice in a Schumpeterian growth model PDF Logo
Authors:Garcίa-Peñalosa, Cecilia
Wen, Jean-François
Issue Date:2004
Series/Report no.:CESifo working papers 1323
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 humpshaped function of the intertemporal spillover effect.
Subjects:growth
innovation
optimal taxation
occupational choice
JEL:O4
O3
H21
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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