Tax Progressivity and Self-Employment Dynamics
JRC Working Papers on Taxation and Structural Reforms No 03/2021
Analysis of the relationship between taxes and self-employment should account for the interplay between responses in self-employment and wage employment. To this end, we estimate a two-state multi-spell duration model which accounts for both observed and unobserved heterogeneity using a large longitudinal administrative dataset for Norway for 1993 to 2011. Our findings confirm theoretical predictions, and are robust to various changes to definitions and sample selections.
A policy experiment simulating a flatter tax schedule in the year 2000 is found to encourage self-employment, delivering a net increase of predicted inflow into self-employment from 2.8% to 5.3%.
ARULAMPALAM Wiji;
PAPINI Andrea;
Arulampalam, W. and Papini, A., Tax Progressivity and Self-Employment Dynamics, European Commission, 2021, JRC125068.
2021-05-04
European Commission
JRC125068
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