The Ability Gradient in Bunching

33 Pages Posted: 20 Apr 2020

See all articles by Spencer Bastani

Spencer Bastani

Linnaeus University - Department of Economics and Statistics

Daniel Waldenström

Research Institute of Industrial Economics

Multiple version iconThere are 3 versions of this paper

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.

Keywords: bunching, ability, skills, complexity, optimal taxation

JEL Classification: H21, H24, J22, J24

Suggested Citation

Bastani, Spencer and Waldenstrom, Daniel, The Ability Gradient in Bunching. IZA Discussion Paper No. 13141, Available at SSRN: https://ssrn.com/abstract=3579233

Spencer Bastani (Contact Author)

Linnaeus University - Department of Economics and Statistics ( email )

Växjö, 351 06
Sweden

Daniel Waldenstrom

Research Institute of Industrial Economics ( email )

P.O. Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

HOME PAGE: http://www.ifn.se/danielw

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