Do lower taxes stimulate self-employment?
2002 (English)In: Small Business Economics, ISSN 0921-898X, E-ISSN 1573-0913, Vol. 19, no 2, 135-145 p.Article in journal (Refereed) Published
This paper investigates the relation between taxation and the share of self-employed in two data sets. First, in a panel of OECD countries a strong negative correlation is found between the tax burden and the share of self-employed in total employment. Unfortunately the OECD data contains a number of measurement problems, and too few observations to allow a reliable detection of reverse causation. Therefore the analysis is complemented with regressions on the relation between the income tax and the share of self-employed using a panel of Swedish counties over the previous two decades. Here again there is a strong negative correlation between the tax burden and the share of self-employment. This survives simultaneous equations estimates and tests of Granger causality. Both samples indicate that reducing the tax burden by 10 percentage points (of GDP) increases the share of self-employed by about 3 percent of total employment.
Place, publisher, year, edition, pages
2002. Vol. 19, no 2, 135-145 p.
liquidity constraints, empirical aspects
IdentifiersURN: urn:nbn:se:kth:diva-21712ISI: 000176806600006OAI: oai:DiVA.org:kth-21712DiVA: diva2:340410
QC 201005252010-08-102010-08-10Bibliographically approved