The Ability Gradient in Bunching

34 Pages Posted: 8 May 2020

See all articles by Spencer Bastani

Spencer Bastani

IFAU - Institute for Labour Market Policy Evaluation; Linnaeus University - Department of Economics and Statistics; Research Institute of Industrial Economics (IFN)

Daniel Waldenström

Paris School of Economics (PSE); Research Institute of Industrial Economics (IFN)

Multiple version iconThere are 3 versions of this paper

Date Written: April 2020

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: ability, bunching, Complexity, optimal taxation, skills

JEL Classification: H21, H24, J22, J24

Suggested Citation

Bastani, Spencer and Waldenström, Daniel, The Ability Gradient in Bunching (April 2020). CEPR Discussion Paper No. DP14599, Available at SSRN: https://ssrn.com/abstract=3594221

Spencer Bastani (Contact Author)

IFAU - Institute for Labour Market Policy Evaluation ( email )

Box 513
751 20 Uppsala
Sweden

Linnaeus University - Department of Economics and Statistics ( email )

Växjö, 351 06
Sweden

Research Institute of Industrial Economics (IFN) ( email )

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

Daniel Waldenström

Paris School of Economics (PSE) ( email )

48 Boulevard Jourdan
Paris, 75014 75014
France

Research Institute of Industrial Economics (IFN) ( email )

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

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