Panel Estimation of Taxable Income Elasticities with Heterogeneity and Endogenous Budget Sets

Soren Blomquist; Anil Kumar; Whitney K Newey

doi:10.48550/arxiv.2501.00633

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Panel Estimation of Taxable Income Elasticities with Heterogeneity and Endogenous Budget Sets

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Panel Estimation of Taxable Income Elasticities with Heterogeneity and Endogenous Budget Sets

Soren Blomquist, Anil Kumar and Whitney K Newey

ArXiV.org

Cornell University

12/31/2024

DOI: 10.48550/arxiv.2501.00633

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Preprint (Author's original)This preprint has not been evaluated by subject experts through peer review. Preprints may undergo extensive changes and/or become peer-reviewed journal articles. Open Access

Abstract

This paper introduces an estimator for the average of heterogeneous elasticities of taxable income (ETI), addressing key econometric challenges posed by nonlinear budget sets. Building on an isoelastic utility framework, we derive a linear-in-logs taxable income specification that incorporates the entire budget set while allowing for individual-specific ETI and productivity growth. To account for endogenous budget sets, we employ panel data and estimate individual-specific ridge regressions, constructing a debiased average of ridge coefficients to obtain the average ETI.

Statistics - Methodology

Details

Title: Subtitle: Panel Estimation of Taxable Income Elasticities with Heterogeneity and Endogenous Budget Sets
Creators: Soren Blomquist - Uppsala University
Anil Kumar - University of Iowa
Whitney K Newey - National Bureau of Economic Research
Resource Type: Preprint
Publication Details: ArXiV.org
DOI: 10.48550/arxiv.2501.00633
ISSN: 2331-8422
Publisher: Cornell University; Ithaca, New York
Language: English
Date posted: 12/31/2024
Academic Unit: Economics
Record Identifier: 9984770792602771

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