The Aging of the Baby Boomers: Demographics and Propagation of Tax Shocks

Domenico Ferraro and Giuseppe Fiori

American Economic Journal: Macroeconomics, 2020, vol. 12, issue 2, 167-93

Abstract: We study how the changing demographic composition of the US labor force has affected the response of the unemployment rate to marginal tax rate shocks. Using narratively identified tax changes as proxies for structural shocks, we establish that the responsiveness of the unemployment rates to tax changes varies significantly across age groups: the unemployment rate response of the young is nearly twice as large as that of the old. This heterogeneity is the channel through which shifts in the age composition of the labor force impact the response of the unemployment rate to tax cuts. We find that the aging of the baby boomers considerably reduces the effects of tax cuts on aggregate unemployment.

JEL-codes: E24 E62 H24 H31 J21 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (8)

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Related works:
Working Paper: Aging of the Baby Boomers: Demographics and Propagation of Tax Shocks (2016)
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DOI: 10.1257/mac.20160419

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