1. |
- Aronsson, Thomas, 1963-, et al.
(författare)
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A maximum likelihood bunching estimator of the elasticity of taxable income
- 2024
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Ingår i: Journal of applied econometrics (Chichester, England). - : John Wiley & Sons. - 0883-7252 .- 1099-1255. ; 39:1, s. 200-216
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Tidskriftsartikel (refereegranskat)abstract
- 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.
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2. |
- Aronsson, Thomas, 1963-, et al.
(författare)
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Alternative parametric bunching estimators of the ETI
- 2018
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Rapport (övrigt vetenskapligt/konstnärligt)abstract
- We propose a maximum likelihood (ML) based method to improve the bunching approach of measuring the elasticity of taxable income (ETI), and derive the estimator for several model settings that are prevalent in the literature, such as perfect bunching, bunching with optimization frictions, notches, and heterogeneity in the ETI. We show that the ML estimator is more precise and likely less biased than ad-hoc bunching estimators that are typically used in the literature. In the case of optimization frictions in the form of random shocks to earnings, the ML estimation requires a prior of the average size of such shocks. The results obtained in the presence of a notch can differ substantially from those obtained using ad-hoc approaches. If there is heterogeneity in the ETI, the elasticity of the individuals who bunch exceeds the average elasticity in the population.
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3. |
- Aronsson, Thomas, 1963-, et al.
(författare)
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Maximum Likelihood Bunching Estimators of the ETI
- 2021
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Rapport (övrigt vetenskapligt/konstnärligt)abstract
- We propose a maximum likelihood method to improve the bunching approach of estimating the elasticity of taxable income (ETI), and derive estimators for several model settings such as bunching with optimization frictions, notches, and heterogeneity in the ETI. Modelling optimization frictions explicitly, our estimators fit the data of several published studies very well. In the presence of a notch, the results can differ substantially from those obtained using the polynomial approach. If there is heterogeneity in the ETI, the elasticity among those who bunch exceeds the average elasticity in the population.
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4. |
- Aronsson, Thomas, 1963-, et al.
(författare)
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The Quality of the Estimators of the ETI
- 2017
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Rapport (övrigt vetenskapligt/konstnärligt)abstract
- Measuring the elasticity of taxable income (ETI) is central for tax policy design. Yet, there are few arguments which support or infirm that current methods yield measurements of the ETI that can be trusted. Our first purpose is to use simulation methods to assess the bias and precision of the prevalent methods used in the literature (IV estimation and bunching methods). Thereby, we aim at (i) explaining the huge differences in empirical results, and (ii) providing arguments in favor of or against using these methods. Our second purpose is to suggest indirect inference estimation to improve the quality of the measurement. We find that the IV regression estimators may suffer from considerable bias and be quite imprecise, whereas the bunching estimators perform better in our controlled environment. We also show that using more of the information available in the data, estimators based on indirect inference principles produce more precise estimates of the ETI than any of the most commonly used methods.
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5. |
- Aronsson, Thomas, 1963-, et al.
(författare)
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The quality of the estimators of the ETI
- 2022
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Ingår i: Journal of Public Economics. - : Elsevier. - 0047-2727 .- 1879-2316. ; 212
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Tidskriftsartikel (refereegranskat)abstract
- The elasticity of taxable income (ETI) is a central statistic for tax policy design. One purpose of the present paper is to use Monte Carlo simulation techniques to assess the bias and precision of the prevalent estimators in the literature, the IV-regression estimator and the bunching estimator. Thereby, we aim to provide arguments in favor of, or against, using these methods. Another is to suggest indirect inference estimation to improve the quality of the measurement of the ETI. While IV-regression estimators perform well in terms of bias under certain conditions, they are more variable than bunching estimators. We also find that bunching estimators can be biased downward. The estimators based on indirect inference principles are practically unbiased and more precise than the other estimators.
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6. |
- Gustafsson, Johan, 1993-
(författare)
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Essays on labor supply, pension policy, and inequality
- 2021
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Doktorsavhandling (övrigt vetenskapligt/konstnärligt)abstract
- Paper [I] analyzes the dynamic properties of life-cycle earnings in Sweden using microdata. We study the evolution of permanent and transitory earnings inequality over the period 2002--2015. Our data comes from administrative records gathered in the ASTRID database. We find that some features of the data do not match the predictions of the heterogeneous or restricted income profile models commonly applied in the earning dynamics literature. Instead, we estimate an alternative permanent-transitory (PT) error components model. Analyzing the covariance structure of both male and female earnings, controlling for educational background, we find that the upward trend in permanent earnings inequality observed in Sweden during the 1990s does not continue in the 2000s, and the financial crisis of 2008 did not have any major impact on the variability of earnings. We further simulate the accumulation of income pension entitlements and find that variations in pension entitlements are smaller among college-educated workers. Paper [II] studies the life-cycle effects of favorable marginal tax treatment on older workers' optimal life-cycle labor supply, retirement timing, and savings. I develop a structural model in continuous time where the life cycle of a representative agent is divided into three distinct phases: pre-treatment, post-treatment, and retirement. Solutions for consumption and savings, labor supply and leisure, and retirement timing are then obtained by solving the model as a salvage value problem. I then calibrate the model to Swedish earnings data and find that the increased extensive margin labor supply is partially offset by a reduction in hours worked during the pre-treatment period. The total effect, however, is an increase in life-cycle labor supply and consumption. \\Paper [III] studies the implications of the structure of public pension programs for the trade-offs determining economic behavior over the life cycle. The economy is modeled as a continuous-time overlapping generations model with endogenous labor supply, savings, and human capital formation. Individuals differ in ability and are free to choose how much to work at each period in time and when to enter and exit the labor market. Numerical simulations provide qualitative insights that a redistributive pension system introduces opposite effects on the incentives for retirement for high- and low-skilled individuals, which leads to increased earnings inequality. This effect can, in turn, dominate reduced pension inequality such that lifetime and population-wide income inequality increase. Ultimately, the equity–efficiency trade-off is found to be difficult to characterize. \noindent \\Paper [IV] explores the effects of pension illiteracy on aggregate labor supply and the redistributive performance of public pension systems. I consider an OLG model in continuous time populated with individuals who differ in labor productivity and pension literacy. Agents suffering from pension illiteracy fail to fully account for the structure of the pension system when planning their economic behavior over the life cycle. I find that pension illiteracy can negatively impact aggregate labor supply and increase earnings inequality and lifetime income inequality. This suggests that pension illiteracy may limit the efficiency gains of an increased correlation between individual contributions and benefits, making the equity–efficiency trade-off difficult to characterize in the context of pension reforms.
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7. |
- Jenderny, Katharina
(författare)
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Mobility of top incomes in germany
- 2016
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Ingår i: The Review of Income and Wealth. - : John Wiley & Sons. - 0034-6586 .- 1475-4991. ; 62:2, s. 245-265
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Tidskriftsartikel (refereegranskat)abstract
- I analyze German top income mobility using micro-level panel data of personal income tax returns which are highly representative for top income taxpayers for the years 2001–06. Top income mobility is assessed in three dimensions: (i) persistence in top income fractiles and its stability over time, (ii) measures of individual mobility that are not dependent on the fractile size: the degree of mobility between equally sized groups and mobility in ranks, and (iii) mobility's impact on top income shares. Persistence in top income fractiles is comparatively high and fairly stable across the analyzed period. Top income recipients are less prone to downward mobility and see less variation in annual ranks than less rich tax units. Mobility's impact on income concentration is moderate. The top percentile's share is reduced by roughly 5 percent over six years.
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8. |
- Jenderny, Katharina, et al.
(författare)
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The Role of Capital Income for Top Income Shares in Germany
- 2015
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Rapport (övrigt vetenskapligt/konstnärligt)abstract
- A large literature has documented top income share series based on income tax statistics using the common methodology established by Piketty (2001, 2003). The widespread disappearance of capital income from the income tax base poses a major challenge to the comparability of these series both over time and between countries. In Germany, capital income was gradually excluded from the income tax base between 2001 and 2009. Using a rich data set containing all income taxpayers' les we provide a homogeneous top income share series including full capital incomes from 2001 to 2010. Missing capital income since 2009 is extrapolated using a composite measure of stock dividends and interest income tax ows. We nd that up to the top percentile the drop displayed in the German raw-data series in 2009 is largely attributable to the disappearance of capital income from the income tax base and not to the crisis. However, the very top of the income distribution is disproportionately hit by the crisis.
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9. |
- Jenderny, Katharina
(författare)
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Top tax progression and capital taxation in Germany
- 2022
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Ingår i: Finanzarchiv. - : Mohr Siebeck. - 0015-2218 .- 1614-0974. ; 78:4, s. 422-469
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Tidskriftsartikel (refereegranskat)abstract
- This paper analyzes the effect of the introduction of a flat tax schedule on capital income on the progressivity of the German personal income tax, with a particular focus on top income groups. The reform-induced change in net incomes is proposed as a measure for progressivity changes at the top. Changes in vertical and horizontal equity are analyzed and broken down by reform component. The analysis is based on a micro-level panel dataset of income tax returns between 2001 and 2006 that is particularly representative for the top of the income distribution. The panel structure is used to construct a permanent reform effect that is less prone to annual volatility in income composition. The reform is found to be regressive. It is shown that the reform included substantial loop-holes. Within the top of the distribution, the gain in net incomes is spread widely, but is not negative under plausible assumptions on reporting adjustments.
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