Identifying behavioral responses to tax reforms: New insights and a new approach

Katrine Marie Jakobsen and Jakob Søgaard

Journal of Public Economics, 2022, vol. 212, issue C

Abstract: We revisit the identification of behavioral responses to tax reforms and develop a new approach for graphical validation and representation of treatment effects. We show that the standard estimation strategy relies on an assumption of constant trend differentials. In the context of income taxation, this implies that differences in income trends across the income distribution should remain constant in the absence of tax reforms. Similar to pre-trend validation of differences-in-differences studies, we can validate this assumption by comparing the evolution of income in untreated parts of the income distribution. We illustrate our new approach by studying several tax reforms in Denmark. (JEL: C14 H30 J22).

Keywords: Tax reforms; Behavioral responses; Identification; Validation (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (7)

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Related works:
Working Paper: Identifying behavioral responses to tax reforms: new insights and a new approach (2022)
Working Paper: Identifying Behavioral Responses to Tax Reforms: New Insights and a New Approach (2020)
Working Paper: Identifying Behavioral Responses to Tax Reforms: New Insights and a New Approach (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:pubeco:v:212:y:2022:i:c:s0047272722000937

DOI: 10.1016/j.jpubeco.2022.104691

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