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This paper investigates the redistributive effects of taxation on occupational choice and growth. We discuss a twoñsector economy in the spirit of Romer (1990). Agents engage in one of two alternative occupations: either selfñemployment in an intermediate goods sector characterized by monopolistic competition, or employment as an ordinary worker in this sector. Entrepreneurial pro_ts are stochastic. The occupational choice under risk endogenizes the number of _rms in the intermediate goods industry. While the presence of entrepreneurial risk results in a suboptimally low number of _rms and depresses growth, nonñlinear tax schemes are partly capable of compensating the negative by effects by ex post providing a social insurance.
Using a large recent representative sample of the adult German population this paper demonstrates that nascent necessity and nascent opportunity entrepreneurs are different with respect to some of the characteristics and attitudes considered to be important for becoming a nascent entrepreneur, and that they behave differently. Given the lack of longitudinal data, however, we have no information about the performance of entrepreneurs from both groups in the longer run.
