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The Taxable Income Elasticity: A Structural Differencing Approach
Research Department, Federal Reserve Bank of Dallas.
Uppsala University, Disciplinary Domain of Humanities and Social Sciences, Faculty of Social Sciences, Department of Economics, Uppsala Center for Fiscal Studies.
2015 (English)Report (Other academic)
Abstract [en]

We extend a standard taxable income model with its typical functional-form assumptions to account for nonlinear budget sets. We propose a new method to estimate a taxable income elasticity that is more policy relevant than the typically estimated elasticity based on linearized budget sets. Using U.S. data from the NBER tax panel for 1979-1990 and differencing methods, we estimate an elasticity of 0.75 for taxable income and 0.20 for broad income. These estimates are higher than those obtained by specifications based on linearization. Our approach offers a new way to address the problem of endogenous observed marginal tax rates.

Place, publisher, year, edition, pages
Uppsala, 2015. , 21 p.
Series
Working paper / Uppsala Center for Fiscal Studies, Uppsala University, 2015:1
Keyword [en]
taxable income, nonlinear budget sets, panel data
National Category
Economics
Research subject
Economics
Identifiers
URN: urn:nbn:se:uu:diva-242144OAI: oai:DiVA.org:uu-242144DiVA: diva2:782509
Available from: 2015-01-21 Created: 2015-01-21 Last updated: 2015-01-23Bibliographically approved

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CiteExportLink to record
Permanent link

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Cite
Citation style
  • apa
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
  • text
  • asciidoc
  • rtf