Risk, Self-Employment and Differential Income Taxation
نویسنده
چکیده
Previous research has identified non-diversifiable risk and a preference for “being one’s own boss” as key determinants of participation in self-employment. Using a simple model of occupational choice, I show how both factors can cause efficiency losses in a free market economy, and how linear differential occupational taxation can improve on the market outcome. A simulation exercise calibrated with UK data advocates a tax premium on employment incomes and a tax cut for the self-employed, in order to generate an efficiency gain of around one third of one per cent of GDP. JEL Nos. : H21, H24, J23.
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