Identifying behavioral responses to tax reforms: New insights and a new approach

Publikation: Bidrag til tidsskriftTidsskriftartikelForskningfagfællebedømt

We revisit the identification of behavioral responses to tax reforms and develop a new approach for graphical validation and representation of treatment effects. We show that the standard estimation strategy relies on an assumption of constant trend differentials. In the context of income taxation, this implies that differences in income trends across the income distribution should remain constant in the absence of tax reforms. Similar to pre-trend validation of differences-in-differences studies, we can validate this assumption by comparing the evolution of income in untreated parts of the income distribution. We illustrate our new approach by studying several tax reforms in Denmark. (JEL: C14 H30 J22).

OriginalsprogEngelsk
Artikelnummer104691
TidsskriftJournal of Public Economics
Vol/bind212
ISSN0047-2727
DOI
StatusUdgivet - aug. 2022

Bibliografisk note

Funding Information:
☆ We thank Amalie Jensen, Thomas Jørgensen, Henrik Kleven, Claus Thustrup Kreiner, Andreas Peichl, Søren Leth-Petersen, Ben Lockwood, Sebastian Siegloch, and Floris Zoutman for helpful comments and discussions. We also thank editor Juan Carlos Suarez Serrato and three anonymous referees for a very constructive revision process. We gratefully acknowledge support from the Danish Economic Policy Research Network (EPRN) and from the Center for Economic Behavior and Inequality (CEBI) at the University of Copenhagen, financed by grant #DNRF134 from the Danish National Research Foundation. Jakobsen also acknowledges support from the Independent Research Fund Denmark, Grant #0128-00007B.

Funding Information:
We thank Amalie Jensen, Thomas Jørgensen, Henrik Kleven, Claus Thustrup Kreiner, Andreas Peichl, Søren Leth-Petersen, Ben Lockwood, Sebastian Siegloch, and Floris Zoutman for helpful comments and discussions. We also thank editor Juan Carlos Suarez Serrato and three anonymous referees for a very constructive revision process. We gratefully acknowledge support from the Danish Economic Policy Research Network (EPRN) and from the Center for Economic Behavior and Inequality (CEBI) at the University of Copenhagen, financed by grant #DNRF134 from the Danish National Research Foundation. Jakobsen also acknowledges support from the Independent Research Fund Denmark, Grant #0128-00007B.

Publisher Copyright:
© 2022 The Author(s)

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