The Ability Gradient in Bunching
33 Pages Posted: 20 Apr 2020
There are 3 versions of this paper
The Ability Gradient in Bunching
The Ability Gradient in Bunching
The Ability Gradient in Bunching
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
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