Åsa Hansson

Docent

Tax policy and entrepreneurship: Empirical evidence from Sweden

Författare

Åsa Hansson

Summary, in English

This paper examines the relationship between income taxes and the decision to become self-employed using data from Sweden. By making it possible to track a large number of individuals over extended time periods and across a number of tax rate changes while controlling for important additional determinants, available tax-return information from Sweden allows for statistical estimation of the influence income taxes have on the probability of becoming self-employed. The changing tax rate structure combined with the fact that the Swedish tax system does not provide additional tax benefits to small business-entrepreneurs compared with those who work as employees, provides a powerful setting through which to examine the tax-rate structure’s influence on individuals’ choice to become self-employed. Contrary to many earlier studies based on US data, this paper finds that both average and marginal taxes have a negative impact on the decision to become self-employed.

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