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The Dynamic Effects of Personal and Corporate Income Tax Changes in the United States

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  • Mertens, Karel
  • Ravn, Morten O

Abstract

This paper estimates the dynamic effects of changes in taxes in the United States. We distinguish between the effects of changes in personal and corporate income taxes using a new narrative account of federal tax liability changes in these two tax components. We develop an estimator in which narratively identified tax changes are used as proxies for structural tax shocks and apply it to quarterly post WWII US data. We find that short run output effects of tax shocks are large and that it is important to distinguish between different types of taxes when considering their impact on the labor market and the major expenditure components.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 8554.

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Date of creation: Sep 2011
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Handle: RePEc:cpr:ceprdp:8554

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Keywords: fiscal policy; measurement error; narrative identification; tax changes;

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References

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Citations

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Cited by:
  1. Samuel Wills, 2014. "Optimal Monetary Responses to Oil Discoveries," CAMA Working Papers 2014-37, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  2. Kliem, Martin & Kriwoluzky, Alexander, 2013. "Reconciling narrative monetary policy disturbances with structural VAR model shocks?," Economics Letters, Elsevier, vol. 121(2), pages 247-251.
  3. Gertler, Mark & Karadi, Peter, 2014. "Monetary Policy Surprises, Credit Costs and Economic Activity," CEPR Discussion Papers, C.E.P.R. Discussion Papers 9824, C.E.P.R. Discussion Papers.
  4. Emily Anderson & Atsushi Inoue & Barbara Rossi, 2012. "Heterogeneous Consumers and Fiscal Policy Shocks," 2012 Meeting Papers, Society for Economic Dynamics 261, Society for Economic Dynamics.
  5. Cloyne, James & Surico, Paolo, 2013. "Household Debt and the Dynamic Effects of Income Tax Changes," CEPR Discussion Papers, C.E.P.R. Discussion Papers 9649, C.E.P.R. Discussion Papers.
  6. James H. Stock & Mark W. Watson, 2012. "Disentangling the Channels of the 2007-2009 Recession," NBER Working Papers 18094, National Bureau of Economic Research, Inc.
  7. Alan S. Blinder & Mark W. Watson, 2014. "Presidents and the U.S. Economy: An Econometric Exploration," NBER Working Papers 20324, National Bureau of Economic Research, Inc.
  8. de Groot, Oliver & Holm-Hadulla, Fédéric & Leiner-Killinger, Nadine, 2012. "Cost of borrowing shocks and fiscal adjustment," Working Paper Series, European Central Bank 1503, European Central Bank.

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