 Deviation signs-based bunching methodsXiaofeng Lv, Yifan Yang, Yue Lu and Liming Hong Economic Modelling, 2025, vol. 143, issue C Abstract: Bunching caused by discontinuous policy has received increased research attention over the last decade. In practice, buncher adjustment costs frequently result in bunching in an unknown region rather than at a specific point (e.g., a kink or notch). To investigate this phenomenon, researchers often rely on visual determination or regional knowledge, the selection of estimated regions, the choice of k in k-fold cross-validation, and the assumption of a conditional lognormal distribution. This study introduces deviation sign-based bunching methods for kink and notch settings with frictions, eliminating the need for these prerequisites. Using conservative non-bunching regions and deviation sign-based indicators, we can calculate the data-driven bunching region and counterfactual distribution. Subsequently, the elasticity of taxable income, a key parameter in bunching research, can be estimated. Simulations validate the efficacy of our methods. The elasticity of Chinese small and micro enterprises is calculated to be 1.267. Keywords: Deviation signs; Bunching regions; Elasticity; Counterfactual distribution; Small and micro enterprises (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:143:y:2025:i:c:s0264999324003262 DOI: 10.1016/j.econmod.2024.106969 Access Statistics for this article Economic Modelling is currently edited by S. Hall and P. Pauly More articles in Economic Modelling from Elsevier |
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