The economics of entreprneurship: Subsidies, risk and tax evasion

Often times, policymakers develop legislation to increase the levels of entrepreneurial activity. These policies exist at the federal, state and local levels as part of economic development plans. This dissertation aims to offer information to policymakers on the effectiveness of existing policies and to evaluate how entrepreneurial individuals behave. There are three approaches taken in this dissertation. The first chapter presents a natural experiment and utilizes a difference-in-difference-in-difference model to investigate whether state level subsidies increased the health insurance take-up rate among the self-employed. The findings suggest that, in fact, these types of subsidies did increase the probability that a self-employed individual would be self-insured. The second chapter presents a laboratory, economic experiment, conducted in the U.S. and replicated in Brazil, which tests to see if entrepreneurial and non-entrepreneurial differ in their financial risk aversion levels. The results supported that entrepreneurial subjects were less risk averse than non-entrepreneurial subjects. Also, the subjects from the U.S. sessions were more entrepreneurial than those from Brazil. The final chapter presents an extension of the Ramsey model, a theoretical macroeconomic model. The model suggests that higher levels of tax evasion lead to lower levels of capital and consumption in a given economy at all points in time. Also, tax evasion leads to a decrease in government revenue. Finally, the model predicts that tax evasion will have no impact on the long-term economic growth rate, which is only determined by productivity growth.