
Open access
Date
2014-12Type
- Working Paper
ETH Bibliography
yes
Altmetrics
Abstract
We explore optimal and politically feasible growth policies in the form of basic research investments and taxation. Basic research is a public good that benefits innovating entrepreneurs, but its provision and financing also affect the entire economy – in particular, occupational choices of potential entrepreneurs, wages, dividends, and aggregate output. We show that the impact of basic research on the general economy rationalizes a taxation pecking order to finance basic research. More specifically, in a society with desirably dense entrepreneurial activity, a large share of funds for basic research should be financed by labor taxation, while a minor share should be left to profit taxation. Such tax schemes will induce a significant proportion of agents to become entrepreneurs, thereby rationalizing substantial investments in basic research that fosters 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 the political support for growth policies. Show more
Permanent link
https://doi.org/10.3929/ethz-a-010290729Publication status
publishedJournal / series
Economics Working Paper SeriesVolume
Publisher
ETH Zurich, Center of Economic Research (CER-ETH)Subject
Basic research; Economic growth; Entrepreneurship; Income taxation; Political economyOrganisational unit
02045 - Dep. Geistes-, Sozial- u. Staatswiss. / Dep. of Humanities, Social and Pol.Sc.03729 - Gersbach, Hans / Gersbach, Hans
Related publications and datasets
Is previous version of: http://hdl.handle.net/20.500.11850/225181
More
Show all metadata
ETH Bibliography
yes
Altmetrics