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ResearchPaper
2016

A data-driven procedure to determine the bunching window : an application to the Netherlands

Abstract (English)

This paper presents new empirical evidence on taxpayers responsiveness to taxation by estimating the compensated elasticity of taxable income with respect to the net-of-tax rate in the Netherlands. Applying the bunching approach introduced by Saez (2010), we find small, but clear evidence of bunching behaviour at the thresholds of the Dutch tax schedule with a precise estimated elasticity of 0.023 at the upper threshold. In line with the literature, we find much larger estimates for women and self-employed individuals, but we can also identify significant bunching behaviour for wage employed individuals which we can attribute to tax deductions for couples. We add to the bunching literature by proposing to rely on the information criteria to determine the counterfactual model, as well as developing an intuitive, data-driven procedure to determine the bunching window.

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Publication series

Hohenheim discussion papers in business, economics and social sciences; 2016,05

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Faculty
Faculty of Business, Economics and Social Sciences
Institute
Institute of Economics

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Language
English

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Classification (DDC)
330 Economics

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BibTeX

@techreport{Bosch2016, url = {https://hohpublica.uni-hohenheim.de/handle/123456789/6029}, author = {Bosch, Nicole and Dekker, Vincent and Strohmaier, Kristina et al.}, title = {A data-driven procedure to determine the bunching window : an application to the Netherlands}, year = {2016}, school = {Universität Hohenheim}, series = {Hohenheim discussion papers in business, economics and social sciences}, }