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

  • Morten Ravn

    (University College London)

  • Karel Mertens

    (Cornell University)

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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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
Contact details of provider: Postal: Society for Economic Dynamics Christian Zimmermann Economic Research Federal Reserve Bank of St. Louis PO Box 442 St. Louis MO 63166-0442 USA
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  12. Rudebusch, Glenn D, 1998. "Do Measures of Monetary Policy in a VAR Make Sense?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(4), pages 907-31, November.
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  23. Karel Mertens & MortenO. Ravn, 2010. "Measuring the Impact of Fiscal Policy in the Face of Anticipation: A Structural VAR Approach," Economic Journal, Royal Economic Society, vol. 120(544), pages 393-413, 05.
  24. Mertens, Karel & Ravn, Morten O, 2012. "A Reconciliation of SVAR and Narrative Estimates of Tax Multipliers," CEPR Discussion Papers 8973, C.E.P.R. Discussion Papers.
  25. James Cloyne, 2011. "What are the Effects of Tax Changes in the United Kingdom? New Evidence from a Narrative Evaluation," CESifo Working Paper Series 3433, CESifo Group Munich.
  26. Tommaso Monacelli & Roberto Perotti & Antonella Trigari, 2011. "Taxes and the Labor Market," Working Papers Central Bank of Chile 623, Central Bank of Chile.
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  29. Aviv Nevo & Adam Rosen, 2008. "Identification with imperfect instruments," CeMMAP working papers CWP16/08, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
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