Effects of Taxes on Youth Self-Employment and Income
42 Pages Posted: 20 Apr 2016
Date Written: March 1, 2016
I study the link between taxes and youth self-employment. I make use of a Swedish reform, implemented in 2007-09, which suddenly made the payroll tax and the self-employment tax vary by age. The results suggest that youth self-employment is insensitive to tax reductions, both in the short run and in the somewhat longer run. I also study the effect of the tax reductions on income. For those that are defined as self-employed, I find positive effects on income from self-employment, and negative effects on income from wage employment. This finding suggests that the lower taxes caused the self-employed to reallocate time from employment to self-employment.
Keywords: Youth unemployment, Self-employment tax, Tax subsidy, Self-employment
JEL Classification: H25, H32, J23, J38, J68
Suggested Citation: Suggested Citation