Taxation, Innovation, and Entrepreneurship

Hans Gersbach, Ulrich Schetter, Maik Schneider

Research output: Contribution to journalArticle

4 Citations (Scopus)
1 Downloads (Pure)

Abstract

We explore optimal and politically feasible growth policies consisting of basic research investments and taxation. We show that the impact of basic research on the general economy rationalises a taxation pecking order with high labour taxes and low profit taxes. This scheme induces a significant proportion of agents to become entrepreneurs, thereby rationalising substantial investments in basic research fostering their innovation prospects. These entrepreneurial economies, however, may make a majority of workers worse off, giving rise to a conflict between efficiency and equality. We discuss ways of mitigating this conflict, and thus strengthening political support for growth policies.
Original languageEnglish
Pages (from-to)1731-1781
Number of pages51
JournalThe Economic journal
Volume129
Issue number620
Early online date11 Jul 2018
DOIs
Publication statusPublished - 1 May 2019

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