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

  • Mertens, Karel
  • Ravn, Morten O

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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  17. Roberto Perotti, 2011. "The Effects of Tax Shocks on Output: Not So Large, But Not Small Either," NBER Working Papers 16786, National Bureau of Economic Research, Inc.
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  23. Karel Mertens & Morten Overgaard Ravn, 2010. "Online Appendix to "Understanding the Aggregate Effects of Anticipated and Unanticipated Tax Policy Shocks"," Technical Appendices 09-221, Review of Economic Dynamics.
  24. Jonas D. M. Fisher & Ryan Peters, 2009. "Using stock returns to identify government spending shocks," Working Paper Series WP-09-03, Federal Reserve Bank of Chicago.
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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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