Taxation and Entrepreneurship in a Welfare State

IFN Working Paper No. 800

39 Pages Posted: 25 Jun 2009 Last revised: 30 Jan 2011

See all articles by Mikael Stenkula

Mikael Stenkula

Research Institute of Industrial Economics (IFN)

Date Written: June 18, 2009

Abstract

Does tax policy affect the rate of self-employment in a modern welfare state? This question is analyzed empirically based on Swedish data for the entire post-war period. Available tax data indicate that payroll taxes have had a negative influence on the unincorporated rate of self-employment, though the effect is modest. No effects from regular labor income taxation or capital gains taxation are found. The paper improves upon earlier studies in that it tries to separate the effects of different taxes, and uses cointegration techniques. A further extension is that it studies a Scandinavian high-tax welfare state. Earlier time-series studies analyzing self-employment and taxation have with few exceptions been based on data from countries with relatively low tax levels and less comprehensive welfare systems, notably the US and the UK.

Keywords: Entrepreneurship, Self-employment, Taxation, Welfare state

JEL Classification: H2, J23, L26

Suggested Citation

Stenkula, Mikael, Taxation and Entrepreneurship in a Welfare State (June 18, 2009). IFN Working Paper No. 800, Available at SSRN: https://ssrn.com/abstract=1421942

Mikael Stenkula (Contact Author)

Research Institute of Industrial Economics (IFN) ( email )

P.O. Box 55665
Stockholm, 102 15
Sweden

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