We’ve worked on this paper for a long time, so I’m thrilled to finally share it! Here’s the link:

nber.org/papers/w34512

Ungated version: econ.uzh.ch/dam/jcr:27d6...

10/10

However, in the absence of tax credits in case of losses (as would be the case with a wealth tax), there is no such insurance. We're only left with the dilution effect, which is unambiguously bad for founders.

9/10

This provides downside insurance: the share of founders who receive any positive exit payoff increases from 16% to 47%. This insurance is actuarially unfair but still potentially attractive for risk-averse founders.

8/10

The second effect depends on the treatment of capital losses. Most startups see their valuations rise but ultimately fail, so losses are common even when interim gains occur. Taxing unrealized gains makes founders cash out early in return for tax credits in case of losses.

7/10

What happens if you tax unrealized gains?

First, it dilutes the successful founders. On average, founder ownership at exit falls by 25%. At the top, payoffs fall by a factor of three.

6/10

While entrepreneurship is very attractive to risk-neutral founders (equivalent to an annual salary of about $460k), risk-averse founders value it at a steep discount.

5/10

We collect new data on the payoff distribution of founders of VC-backed startups in the US.

It’s extremely skewed: 84% end up with zero exit value, the top 2% get 80% of the total value, and the distribution has a very thick Pareto tail.

4/10

This year’s Nobel laureate Philippe Aghion recently warned against a wealth tax in France: ”Mistral AI [a leading French AI startup] will have to find financiers to pay its taxes instead of being able to fund innovation.”

But we lack both theory and evidence on these effects!

3/10

This question took center stage in the debate over the “Zucman tax” in France and during the last US presidential election (Kamala Harris’s proposal to tax unrealized gains, which was met with strong opposition from the VC community).

2/10

Danke Matthias!

We will continue to work hard on attracting outstanding economists from around the world to Zurich, including from the U.S., and on raising the resources needed to support them—especially during the current, special times in the international higher education landscape.

7/7

I am proud of all the new colleagues we have been able to attract to our UZH Department of Economics over the last few years, and I am thrilled that Esther and Abhijit have now chosen us as their new academic home--it marks a true quantum leap for @econ.uzh.ch and beyond!

6/7

This transformational hire has been made possible through a CHF 26 million (USD 32 million) donation from the Lemann Foundation, and we are deeply grateful for this generous support.

You can read the official University of Zurich announcement here:

www.news.uzh.ch/en/articles/...

5/7

They have supported our department for many years as members of the @ubscenter.uzh.ch advisory board.

At the University of Zurich, Esther and Abhijit will co-lead the newly established Lemann Center for Development, Education, and Public Policy.

4/7

Beyond their groundbreaking research, they are equally known for their exceptional commitment to student and faculty mentoring and to institution building—something I had the privilege to experience firsthand as a student at MIT.

3/7

As pioneers in development economics, they have profoundly shaped the field through their experimental and evidence-based approach to understanding poverty, inequality, and policy effectiveness, recognized by the Nobel Prize in 2019.

2/7