Taxation, entrepreneurship, and wealth
By: Marco Cagetti and Mariacristina De Nardi
Contributors: De Nardi, Mariacristina; Federal Reserve Bank of Chicago. Research Department
Series: Working paper series -- WP-2006-7; Working paper series (Federal Reserve Bank of Chicago. Research Department : Online) -- WP-2006-7.
Publisher: Federal Reserve Bank of Chicago
Published: 2006
Place of publication: Chicago, Ill.]
Language: eng
Format: [electronic resource] /
Subjects: Taxation; Entrepreneurship; Small business
Description: "Entrepreneurship is a key determinant of investment, saving, and wealth inequality. We study the aggregate and distributional effects of several tax reforms in a model that recognizes this key role and that matches the large wealth inequality observed in the U.S. data. The aggregate effects of tax reforms can be particularly large when they affect small and medium-sized businesses, which face the most severe financial constraints, rather than big businesses. The consequences of changes in the estate tax depend heavily on the size of its exemption level. The current effective estate tax system insulates smaller businesses from the negative effects of estate taxation, minimizing the aggregate costs of redistribution. Abolishing the current estate tax would generate a modest increase in wealth inequality and slightly reduce aggregate output. Decreasing the progressivity of the income tax generates large increases in output, at the cost of large increases in wealth concentration. "--Federal Reserve Bank of Chicago web site.
Notes: Title from PDF file as viewed on 10/12/2006.

Includes bibliographical references.

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