Bunching Estimates of the ETI

.

Chapter 10 in The Elasticity of Taxable Income, 2022, pp 221-250 from Edward Elgar Publishing

Abstract: This chapter turns to an estimation method which relies on the `bunching' of individuals at income thresholds, where marginal income tax rates change. The method avoids the need for longitudinal information about income changes of individuals over time, separating `treatment' and `control' groups, and/or finding suitable `instruments' to deal with endogeneity. It is shown that a direct relationship exists between the elasticity of taxable income and the extent of observed bunching: the ETI is directly proportional to the extent of bunching. Cross-sectional income distribution data for NZ are used, and estimates are obtained for a variety of tax kinks and years. Furthermore, elasticity estimates obtained from persistent bunching at kink points when the tax regime is unchanged are compared with the more transitory effects on bunching associated with tax reforms. Adjustment costs and/or inattention biases associated with a shift in a tax threshold are found to be important.

Keywords: Economics and Finance (search for similar items in EconPapers)
Date: 2022
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.elgaronline.com/view/9781802209594.00019.xml (application/pdf)
Our link check indicates that this URL is bad, the error code is: 503 Service Temporarily Unavailable

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:elg:eechap:21391_10

Ordering information: This item can be ordered from
http://www.e-elgar.com

Access Statistics for this chapter

More chapters in Chapters from Edward Elgar Publishing
Bibliographic data for series maintained by Darrel McCalla ().