Cristian Bartolucci (Collegio Carlo Alberto)

“A Symmetric Model of Firms and Workers”

Abstract

In this paper we develop a model in which unemployed searchers may either encountera firm and be considered as a new employee or may generate a business idea in which case they begin their own firm. This is the first paper in which an equilibrium distribution of firm owners and employees is generated from a common distribution of individuals searching for employment opportunities. Wages of dependent workers are determined through Nash bargaining, and the rate of meeting fims is endogenous, depending on the size of the set of firms and unemployed searchers. We explore theimpact of taxes on prots and wages in this setting, as well as fees for beginning a business. We find that fees for beginning a business are too small, which results in too many low quality rms being started. After estimating the model using Current Population Survey and Survey of Business Owners data, we determine the optimal mix of taxes on prots, wages, and fees for starting a business.