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http://hdl.handle.net/10419/27230
  
Title:Risky earnings, taxation and entrepreneurial choice: a microeconometric model for Germany PDF Logo
Authors:Fossen, Frank M.
Issue Date:2007
Series/Report no.:Discussion papers // German Institute for Economic Research 705
Abstract: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.
Subjects:Entrepreneurship
Risk
Returns to Self-Employment
Taxation
JEL:J23
H24
D81
C51
Document Type:Working Paper
Appears in Collections:Publikationen von Forscherinnen und Forschern des DIW
DIW-Diskussionspapiere

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