%0 Journal Article %J The Economic Journal %D 2019 %T Taxation, Innovation, and Entrepreneurship %A Schetter, Ulrich %A Gersbach, Hans %A Schneider, Maik T. %X We explore optimal and politically feasible growth policies consisting of basic research investments and taxation. We show that the impact of basic research on the general economy rationalises a taxation pecking order with high labour taxes and low profit taxes. This scheme induces a significant proportion of agents to become entrepreneurs, thereby rationalising substantial investments in basic research fostering their innovation prospects. These entrepreneurial economies, however, may make a majority of workers worse off, giving rise to a conflict between efficiency and equality. We discuss ways of mitigating this conflict, and thus strengthening political support for growth policies. %B The Economic Journal %V 129 %P 1731-1781 %G eng %U https://doi.org/10.1111/ecoj.12588 %N 620