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Bettina Brüggemann. Assistant Professor of Economics at McMaster University

Bettina Brüggemann talks about winning a prestigious 2022 American Economic Journal Best Paper Award

Bettina won the award for Macroeconomics Best Paper for the publication: Higher Taxes at the Top: The Role of Entrepreneurs. Learn about her process in this Q&A.

Apr 26, 2022

 

  • How did it feel when you found out you received the AEJ Best Paper Award?

Shocked. It was completely unexpected, but definitely a pleasant surprise. It feels good when hard work gets recognized.

  • Your research paper focused on the impact of optimal top marginal tax rates when we consider entrepreneurs. Why did you choose that topic?

One concern with raising taxes on the highest incomes is that it would stifle entrepreneurial activity. This is because there are a lot of very productive entrepreneurs among the highest income earners and any tax increase targeted at the top of the income distribution would especially affect them. Yet, the macroeconomic literature had not explicitly considered entrepreneurs in their analyses of optimal top marginal taxes. It was a research gap that I was happy to explore! 

  • Were you surprised by your findings?

I found welfare gains would be highest if the (effective) top marginal tax rate in the US increased from 23.5 to 60 percent. This was somewhat lower than what previous papers without entrepreneurship had found, but still quite high. Surprising to me was what I found when I looked more closely at the effects on entrepreneurs: lower-income entrepreneurs that were not directly affected by the tax increase benefitted a lot from the tax increase at the top. One reason for this was that I assumed that additional tax revenue was redistributed to households. Another reason was a so-called general equilibrium effect: after the tax increase, real wages fell, which made it cheaper for entrepreneurs to hire labour and grow. 

  • What’s next for Bettina?

I have a few exciting projects in the works together with my co-author Zach Mahone. In one paper, we're taking a deeper dive into portfolios and rates of return for entrepreneurs and in another, we're studying the patterns behind the decision to become an entrepreneur. For the latter, we're using an exciting new Canadian dataset and I'm very curious to see what we find. Unrelated to entrepreneurship, we are working on a project investigating how different housing policies shaped the racial wealth gap in the US. 

Otherwise, I am looking forward to returning to campus and teaching in person again! I have not yet been back because I was on maternity leave these past few months, but I can't wait to return after two long pandemic years.

  • Random question: If you could have dinner with anyone throughout history, who would it be?

A lot of very famous people come to mind, but I will say my great-grandmother. My daughter shares her first name, but I know very little about her life. I would love to have dinner with her when she was my age and learn more about it!