Scandinavian Working Papers in Economics

Working Paper Series,
Research Institute of Industrial Economics

No 1117: Effects of Taxes on Youth Self-Employment and Income

Johan Egebark ()
Additional contact information
Johan Egebark: Research Institute of Industrial Economics (IFN), Postal: P.O. Box 55665, SE-102 15 Stockholm, and Arbetsförmedlingen, Stockholm, Sweden

Abstract: 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-codes: H25; H32; J23; J38; J68

41 pages, March 10, 2016

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