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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, 2013. "Optimal Monetary Responses to Oil Discoveries," Economics Series Working Papers OxCarre Research Paper 12, University of Oxford, Department of Economics.
  2. Gertler, Mark & Karadi, Peter, 2014. "Monetary Policy Surprises, Credit Costs and Economic Activity," CEPR Discussion Papers 9824, C.E.P.R. Discussion Papers.
  3. Anderson, Emily & Inoue, Atsushi & Rossi, Barbara, 2013. "Heterogeneous Consumers and Fiscal Policy Shocks," CEPR Discussion Papers 9631, C.E.P.R. Discussion Papers.
  4. Kliem, Martin & Kriwoluzky, Alexander, 2013. "Reconciling narrative monetary policy disturbances with structural VAR model shocks?," Discussion Papers 23/2013, Deutsche Bundesbank, Research Centre.
  5. 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.).
  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. 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.

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