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

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  • Morten Ravn

    (University College London)

  • Karel Mertens

    (Cornell University)

Abstract

This paper estimates the dynamic effects of changes in taxes in the United States. We dis- tinguish 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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Bibliographic Info

Paper provided by Society for Economic Dynamics in its series 2012 Meeting Papers with number 638.

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Date of creation: 2012
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Handle: RePEc:red:sed012:638

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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. 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.
  3. Kliem, Martin & Kriwoluzky, Alexander, 2013. "Reconciling narrative monetary policy disturbances with structural VAR model shocks?," Discussion Papers 23/2013, Deutsche Bundesbank, Research Centre.
  4. Oliver de Groot & Fédéric Holm-Hadulla & Nadine Leiner-Killinger, 2013. "Cost of borrowing shocks and fiscal adjustment," Finance and Economics Discussion Series 2013-59, Board of Governors of the Federal Reserve System (U.S.).
  5. Mark Gertler & Peter Karadi, 2014. "Monetary Policy Surprises, Credit Costs and Economic Activity," NBER Working Papers 20224, National Bureau of Economic Research, Inc.
  6. Cloyne, James & Surico, Paolo, 2014. "Household debt and the dynamic effects of income tax changes," Bank of England working papers 491, Bank of England.
  7. Emily Anderson & Atsushi Inoue & Barbara Rossi, 2012. "Heterogeneous Consumers and Fiscal Policy Shocks," 2012 Meeting Papers 261, Society for Economic Dynamics.

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