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

  • Karel Mertens
  • Morten O. Ravn

This paper estimates the dynamic effects of changes in taxes in the United States. We distinguish between changes in personal and corporate income taxes and develop a new narrative account of federal tax liability changes in these two tax components. We develop an estimator which uses narratively identified tax changes as proxies for structural tax shocks and apply it to quarterly post-WWII 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 on expenditure components.

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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 103 (2013)
Issue (Month): 4 (June)
Pages: 1212-47

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Handle: RePEc:aea:aecrev:v:103:y:2013:i:4:p:1212-47
Note: DOI: 10.1257/aer.103.4.1212
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  23. Raj Chetty & Adam Guren & Dayanand S. Manoli & Andrea Weber, 2011. "Does Indivisible Labor Explain the Difference Between Micro and Macro Elasticities? A Meta-Analysis of Extensive Margin Elasticities," NBER Working Papers 16729, National Bureau of Economic Research, Inc.
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  31. Rudebusch, Glenn D, 1998. "Do Measures of Monetary Policy in a VAR Make Sense? A Reply," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(4), pages 943-48, November.
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