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

Enrico Rubolino and Daniel Waldenström ()
Additional contact information
Enrico Rubolino: Uppsala University
Daniel Waldenström: Research Institute of Industrial Economics (IFN), Postal: and Paris School of Economics, CEPR and IZA, http://www.ifn.se/eng/people/research-faculty/danielw

No 1160, Working Paper Series from Research Institute of Industrial Economics

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: Economic history; Income inequality; Taxation (search for similar items in EconPapers)
JEL-codes: D31 H21 H24 H26 N40 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-his, nep-pbe and nep-pub
Date: 2017-03-27
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:iuiwop:1160

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