Full Citation

Title: Estimating tax income elasticities using a group-averaged synthetic tax instrument

Citation Type: Journal Article

Publication Year: 2019

ISBN:

ISSN:

DOI:

NSFID:

PMCID:

PMID:

Abstract: A common approach to estimating the elasticity of income to taxation is to construct an instrumental variable using synthetic tax rates. Individual-level income dynamics threaten the validity of this instrument, but this problem can potentially be mitigated by group-averaging the instrument. In this article I show that rather than imposing an arbitrary minimum threshold for group sizes to avoid small-sample bias, researchers should use leave-one-out group averages. Using CPS data I show that this correction increases the estimate for broad income elasticity.

Url: http://www.accessecon.com/Pubs/EB/2019/Volume39/EB-19-V39-I3-P200.pdf

User Submitted?: Yes

Authors: Seuri, Allan

Periodical (Full): Economics Bulletin

Issue: 3

Volume: 39

Pages: 2137-2141

Data Collections: IPUMS CPS

Topics: Labor Force and Occupational Structure

Countries: