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The Ability Gradient in Bunching

Author

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  • Waldenström, Daniel

    (Research Institute of Industrial Economics (IFN))

  • Bastani, Spencer

    (Department of Economics and Statistics)

Abstract

We analyze the relationship between cognitive ability and bunching in the context of a large and salient kink point of the Swedish income tax schedule. Using population-wide register data from the Swedish military enlistment and administrative tax records, we find that high-ability individuals bunch more than low-ability individuals. This ability gradient is stronger for the self-employed, but is also present among wage earners. We also use high-school GPA and math grades to analyze gender differences, finding a stronger ability gradient among men.

Suggested Citation

  • Waldenström, Daniel & Bastani, Spencer, 2020. "The Ability Gradient in Bunching," Working Paper Series 1333, Research Institute of Industrial Economics.
  • Handle: RePEc:hhs:iuiwop:1333
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    More about this item

    Keywords

    Bunching; Ability; Skills; Complexity; Optimal Taxation;
    All these keywords.

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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