Arbeitspapier
Individual heterogeneity, nonlinear budget sets and taxable income
Many studies have estimated the effect of taxes on taxable income. To account for nonlinear taxes these studies either use instrumental variables approaches that are not fully consistent or impose strong functional form assumptions. None allow for general heterogeneity in preferences. In this paper we derive the expected value and distribution of taxable income conditional on a nonlinear budget set, allowing general heterogeneity and optimization error in taxable income. We find an important dimension reduction and use that to develop nonparametric estimation methods. We show how to nonparametrically estimate the expected value of taxable income imposing all the restrictions of utility maximization and allowing for measurement errors. We characterize what can be learned nonparametrically from kinks about compensated tax effects. We apply our results to Swedish data and estimate for prime age males a significant net of tax elasticity of 0.21 and a significant nonlabor income effect of about -1. The income effect is substantially larger in magnitude than it is found to be in other taxable income studies.
- Language
-
Englisch
- Bibliographic citation
-
Series: cemmap working paper ; No. CWP21/15
- Classification
-
Wirtschaft
Semiparametric and Nonparametric Methods: General
Single Equation Models; Single Variables: Truncated and Censored Models; Switching Regression Models; Threshold Regression Models
Fiscal Policies and Behavior of Economic Agents: Household
Time Allocation and Labor Supply
- Subject
-
Nonlinear budget sets
nonparametric estimation
heterogeneous preferences
taxable income
revealed stochastic preference
- Event
-
Geistige Schöpfung
- (who)
-
Blomquist, Soren
Kumar, Anil
Liang, Che-Yuan
Newey, Whitney K.
- Event
-
Veröffentlichung
- (who)
-
Centre for Microdata Methods and Practice (cemmap)
- (where)
-
London
- (when)
-
2015
- DOI
-
doi:10.1920/wp.cem.2015.2115
- Handle
- Last update
-
10.03.2025, 11:45 AM CET
Data provider
This object is provided by:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Blomquist, Soren
- Kumar, Anil
- Liang, Che-Yuan
- Newey, Whitney K.
- Centre for Microdata Methods and Practice (cemmap)
Time of origin
- 2015
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