Errors-in-Variables and Estimated Income and Price Elasticities of Charitable Giving

35 Pages Posted: 25 May 2006 Last revised: 17 Jan 2011

See all articles by David Joulfaian

David Joulfaian

U.S. Department of the Treasury, Office of Tax Analysis (OTA); Georgetown University - Department of Economics

Mark Rider

Georgia State University - Department of Economics

Date Written: January 15, 2011

Abstract

Researchers often rely on self-reported tax data to gauge the effect of taxes on economic activity. These data, however, are subject to measurement errors in the presence of tax evasion. We find evidence that estimated income and tax price elasticities are biased due to errors-in variables in self-reported tax data. We propose a method to diagnose whether the estimates are subject to measurement error bias and describe a methodology employing Two-Stage Least Squares to obtain consistent estimates.

Keywords: Charitable Contributions, Tax Evasion

JEL Classification: D64, H26, H31

Suggested Citation

Joulfaian, David and Rider, Mark, Errors-in-Variables and Estimated Income and Price Elasticities of Charitable Giving (January 15, 2011). National Tax Journal, Vol. 57, No 1, March 2004. Available at SSRN: https://ssrn.com/abstract=904108

David Joulfaian (Contact Author)

U.S. Department of the Treasury, Office of Tax Analysis (OTA) ( email )

1500 Pennsylvania Ave. NW
Washington, DC 20220
United States

Georgetown University - Department of Economics ( email )

37th St NW & O St NW
Washington, DC 20007
United States

Mark Rider

Georgia State University - Department of Economics ( email )

35 Broad Street
Atlanta, GA 30303-3083
United States

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