Bunching

Posted: 18 Nov 2016

See all articles by Henrik Kleven

Henrik Kleven

London School of Economics & Political Science (LSE) - Suntory and Toyota International Centres for Economics and Related Disciplines (STICERD)

Date Written: October 2016

Abstract

Recent years have seen a surge of applied work using bunching approaches, a development that is closely linked to the increased availability of administrative data. These approaches exploit the incentives for bunching created by discontinuities in the slope of choice sets (kinks) or in the level of choice sets (notches) to study the behavior of individuals and firms. Although the bunching approach was originally developed in the context of taxation, it is beginning to find applications in many other areas, such as social security, social insurance, welfare programs, education, regulation, private sector prices, and reference-dependent preferences. This review provides a guide to bunching estimation, discusses its strengths and weaknesses, surveys a range of applications across fields, and considers reasons for the ubiquity of kinks and notches.

Suggested Citation

Kleven, Henrik, Bunching (October 2016). Annual Review of Economics, Vol. 8, pp. 435-464, 2016. Available at SSRN: https://ssrn.com/abstract=2870846 or http://dx.doi.org/10.1146/annurev-economics-080315-015234

Henrik Kleven (Contact Author)

London School of Economics & Political Science (LSE) - Suntory and Toyota International Centres for Economics and Related Disciplines (STICERD) ( email )

Houghton Street
London WC2A 2AE
United Kingdom

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