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Social Structure and Social Policy: About the Institutional Flexibility of Three Modern Welfare States

This paper addresses the question of the institutional flexibility of three major European welfare states. Using Data from the second and fifth wave of the Luxembourg Income Study (LIS), we measure first how effectively the German, British and Italian welfare state have responded to changes in their country-specific poverty risks profile. Further, we apply a macro-simulation to evaluate the performance ...

The effects of income taxation on entrepreneurial investment: A puzzle?

We investigate how personal income taxes affect the portfolio share of personal wealth that entrepreneurs invest in their own business. In a portfolio choice model that allows for tax sheltering, we show that lower tax rates may increase investment in entrepreneurial equity at the intensive margin, but decrease it at the extensive margin. Using German panel data, we identify tax effects on the portfolio ...

Risky Earnings, Taxation and Entrepreneurial Choice: A Microeconometric Model for Germany

Would a Flat Tax Stimulate Entrepreneurship in Germany? A Behavioural Microsimulation Analysis Allowing for Risk

When potential income tax reforms are debated, the suspected impact on entrepreneurship is often used as an argument in favour of or against a certain policy. Quantitative ex-ante evaluations of the effect of certain tax reform options on entrepreneurship are very rare, however. This paper estimates the ex-ante effects of the German tax reform 2000 and of two hypothetical flat-rate tax scenarios on ...

Insolvenzordnung: Möglichkeit des Neustarts erleichtert Unternehmensgründungen

Seit 1999 die Insolvenzordnung eingeführt wurde, können sich Privatpersonen, die sich überschuldet haben, in einem Insolvenzverfahren entschulden. Dafür muss der private Schuldner zunächst die sechsjährige Wohlverhaltensphase durchlaufen, während derer sein Einkommen oberhalb einer Pfändungsgrenze an die Gläubiger abgeführt wird. Nach dieser Phase werden die Restschulden erlassen. Da in Einzelunternehmen ...

The Private Equity Premium Puzzle Revisited - New Evidence on the Role of Heterogenous Risk Attitudes

The empirical finding that entrepreneurs invest a large share of their wealth in their own firms, despite comparably low returns and high risk, has become known as the private equity premium puzzle. This paper provides evidence supporting the hypothesis that lower risk-aversion of entrepreneurs, and thus not necessarily credit constraints, may explain this puzzle. The analysis is based on a representative ...

Gender Differences in Entrepreneurial Choice and Risk Aversion: A Decomposition Based on a Microeconometric Model

Why are female entrepreneurs so rare? In Germany, women exhibit both a lower entry rate into and higher exit rate from self-employment. To explain this gender gap, this study estimates a structural microeconometric model of transition rates that includes a standard risk aversion parameter. Inputs into the model are the expected value and variance of earnings from self-employment and dependent employment, ...

Risk Attitudes and Private Business Equity

Why do people engage in entrepreneurship and commit large parts of their personal wealth to their business, despite comparably low returns and high risk? This paper connects several streams of literature to shed some light on this puzzle and suggests possible future research avenues. Key insights from the literature are that entrepreneurs may operate in imperfect financial markets and that entrepreneurs ...

Personal Bankruptcy Law, Wealth and Entrepreneurship – Theory and Evidence from the Introduction of a "Fresh Start“

A personal bankruptcy law that allows for a “fresh start” not only reduces the individual risk involved in entrepreneurship, but may also lead to higher interest rates charged by creditors. Both effects are less relevant for wealthy potential entrepreneurs. This paper illustrates these effects in a model and tests the hypotheses derived by exploiting the introduction of a “fresh start” policy in Germany ...

The returns to education for opportunity entrepreneurs, necessity entrepreneurs and paid employees

We assess the relevance of formal education on the productivity of the self-employed, distinguishing between opportunity entrepreneurs, who voluntarily pursue a business opportunity, and necessity entrepreneurs, who lack alternative employment options. We expect differences in the returns to education between these groups due to different levels of control over the use of their human capital. The analysis ...