Trends and Gradients in Top Tax Elasticities: Cross-Country Evidence, 1900–2014

Enrico Rubolino () and Daniel Waldenström

No 10667, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We compile data spanning the period 1900–2014 and up to 30 countries to study long-run patterns in the tax elasticity of top incomes. Our results show that top tax elasticities vary tremendously over time; they were medium-to-low before 1950, virtually zero during the postwar era up to 1980 and have thereafter increased to unprecedented levels. We document a strong income gradient in tax response within the top, underlining the importance to study even small top groups separately. Several mechanisms are investigated. Tax-driven income shifting between wage and capital income is important in the very top. Wars, financial crises, and country-specific effects and trends have bearing on top elasticities whereas standard macroeconomic factors and indicators of "real responses" do not.

Keywords: taxation; income inequality; economic history (search for similar items in EconPapers)
JEL-codes: D31 H21 H24 H26 N40 (search for similar items in EconPapers)
Pages: 76 pages
Date: 2017-03
New Economics Papers: this item is included in nep-his, nep-pbe and nep-pub
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Trends and gradients in top tax elasticities: cross-country evidence, 1900–2014 (2019)
Working Paper: Trends and gradients in top tax elasticities: Cross-country evidence, 1900-2014 (2017)
Working Paper: Trends and Gradients in Top Tax Elasticities: Cross-country Evidence, 1900–2014 (2017)
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