ECONOMETRIC ISSUES IN ESTIMATING THE BEHAVIORAL RESPONSE TO TAXATION: A NONTECHNICAL INTRODUCTION

Reliable estimates of how tax incentives affect behavior are an essential input into the formation of tax policy. However, one encounters a number of difficult econometric problems in estimating the magnitude of the behavioral effects. This paper provides a nontechnical introduction to some of the m...

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Bibliographic Details
Published in:National tax journal 1998-12, Vol.51 (4), p.761-772
Main Author: TRIEST, ROBERT K.
Format: Article
Language:English
Subjects:
Analysis
Behavior
Behavioral sciences
Bias
Charities
Consumer behavior
Donations
Econometrics
Economic research
Estimated taxes
Fiscal policy
FORUM ON THE BEHAVIORAL RESPONSE TO TAXATION: ECONOMETRIC AND POLICY ISSUES
Identification
Income taxes
Labor supply
Marginal tax rate
Prices
Social aspects
State taxes
Tax incentives
Tax policy
Tax rates
Tax reform
Taxable income
Taxation
Taxpaying
Wages & salaries
Welfare
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Summary:Reliable estimates of how tax incentives affect behavior are an essential input into the formation of tax policy. However, one encounters a number of difficult econometric problems in estimating the magnitude of the behavioral effects. This paper provides a nontechnical introduction to some of the more prominent problems, particularly the endogeneity of marginal tax rates and the problem of identifying tax effects, and discusses two estimation techniques used in recent studies: difference-in-differences and instrumental variables using panel data.
ISSN:0028-0283
1944-7477
DOI:10.1086/NTJ41789367