Problematic response margins in the estimation of the elasticity of taxable income

Kristoffer Berg and Thor Thoresen

Discussion Papers from Statistics Norway, Research Department

Abstract: The elasticity of taxable income (ETI) is known to represent a summary measure of tax efficiency costs, which means that further information about the behavioral components of the ETI is not required for its use in tax policy design. However, as there are response margins that may cause biases in the estimation of the elasticity, we advise against neglecting information about the composition of the behavior seized by the ETI. When using responses of the Norwegian self-employed to the tax reform of 2006 for illustration, we discuss how four different responses relate to the overall ETI, given characteristics of the reform. Effects on working hours, on tax evasion, and from shifts in organizational form and across tax bases are discussed in terms of to what extent they represent sources to estimation bias, or enter into the ETI in a decompositional way. We provide empirical illustrations of the effects of each of these margins, and we show that the estimated ETI is biased downward because of organizational shifts.

Keywords: elasticity of taxable income; self-employed; tax evasion; organizational shift (search for similar items in EconPapers)
JEL-codes: H24 H26 H31 J2 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2016-11
New Economics Papers: this item is included in nep-iue, nep-lma, nep-pbe and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.ssb.no/en/forskning/discussion-papers/_attachment/285306 (application/pdf)

Related works:
Journal Article: Problematic response margins in the estimation of the elasticity of taxable income (2020)
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:ssb:dispap:851

Ordering information: This working paper can be ordered from
https://www.ssb.no/e ... ty-of-taxable-income

Access Statistics for this paper

More papers in Discussion Papers from Statistics Norway, Research Department P.O.Box 8131 Dep, N-0033 Oslo, Norway. Contact information at EDIRC.
Bibliographic data for series maintained by L Maasø ().