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A maximum likelihood bunching estimator of the elasticity of taxable income
Umeå University, Faculty of Social Sciences, Umeå School of Business and Economics (USBE), Economics.
Umeå University, Faculty of Social Sciences, Umeå School of Business and Economics (USBE), Economics.
Umeå University, Faculty of Social Sciences, Umeå School of Business and Economics (USBE), Economics.ORCID iD: 0000-0001-9244-7018
2024 (English)In: Journal of applied econometrics (Chichester, England), ISSN 0883-7252, E-ISSN 1099-1255, Vol. 39, no 1, p. 200-216Article in journal (Refereed) Published
Abstract [en]

This paper develops a maximum likelihood (ML) bunching estimator of the elasticity of taxable income (ETI). Our structural approach provides a natural framework to simultaneously account for unobserved preference heterogeneity and optimization errors and for measuring their relative importance. We characterize the conditions under which the parameters of the model are identified and show that the ML estimator performs well in terms of bias and precision. The paper also contains an empirical application using Swedish data, showing that both the ETI and the standard deviation of the optimization friction are precisely estimated, albeit relatively small.

Place, publisher, year, edition, pages
John Wiley & Sons, 2024. Vol. 39, no 1, p. 200-216
Keywords [en]
bunching, elasticity of taxable income, maximum likelihood
National Category
Economics
Research subject
Economics
Identifiers
URN: urn:nbn:se:umu:diva-214645DOI: 10.1002/jae.3015ISI: 001144475700001Scopus ID: 2-s2.0-85182410064OAI: oai:DiVA.org:umu-214645DiVA, id: diva2:1799275
Funder
The Jan Wallander and Tom Hedelius Foundation, P2016-0140:1The Royal Swedish Academy of Sciences, SO2017‐0037Swedish Research Council, 2018‐01488Available from: 2023-09-21 Created: 2023-09-21 Last updated: 2024-04-26Bibliographically approved

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Aronsson, ThomasJenderny, KatharinaLanot, Gauthier

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CiteExportLink to record
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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