Omitted Variable Bias in Time Series Estimates of Capital Gains Realizations

19 Pages Posted: 13 Jan 2003

See all articles by George A. Plesko

George A. Plesko

University of Connecticut School of Business

Date Written: November 2002

Abstract

This paper addresses the omitted variable problem in time series studies of individual capital gains realizations. While not directly identifying the omitted variables, I use the realizations of corporate capital gains to test for common omitted variables. Jointly estimating individual and corporate realizations provides more efficient estimates than traditional single-equation models. The results provide empirical support for omitted variables being important in time series models. In both single-equation or multi-equation models controlling for omitted variables greatly reduces the estimated elasticities of individual and corporate capital gains.

Keywords: capital gains, tax

JEL Classification: H2, C3

Suggested Citation

Plesko, George A., Omitted Variable Bias in Time Series Estimates of Capital Gains Realizations (November 2002). Available at SSRN: https://ssrn.com/abstract=356780 or http://dx.doi.org/10.2139/ssrn.356780

George A. Plesko (Contact Author)

University of Connecticut School of Business ( email )

School of Business
Storrs, CT 06269-2041
United States
860-486-6421 (Phone)

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