Do progressive marginal income tax rates discourage self-employment? We assume risk neutrality to construct an implicit surtax on stochastic income relative to steady income, arising from a convex tax schedule. It is computed as part of a structural probit model with earnings equations and a tax simulator. The tax convexity variable and the net-of-tax income difference between self- and paid employment have the predicted signs and high levels of statistical significance for the probability of self-employment. A simulated flat tax reform suggests the tax effects are small.

Given the wide use of child care subsidies across countries, it is surprising how little we know about the effect of these subsidies on children's longer-run outcomes. Using a sharp discontinuity in the price of child care in Norway, we are able to isolate the effects of child care subsidies on both parental and student outcomes. We find very small and statistically insignificant effects of child care subsidies on child care utilization and parental labor force participation. Despite this, we find significant positive effect of the subsidies on children's academic performance in junior high school, suggesting that the positive shock to disposable income provided by the subsidies may be helping to improve children's scholastic aptitude.