Working Paper No. 1333

The Ability Gradient in Bunching

Published: April 22, 2020Pages: 32Keywords: Bunching; Ability; Skills; Complexity; Optimal TaxationJEL-codes: H21; H24; J22; J24

The Ability Gradient in Bunching Spencer Bastani and Daniel Waldenström

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.

Reference:
Bastani, Spencer and Daniel Waldenström (2020), "The Ability Gradient in Bunching". IFN Working Paper No. 1333. Stockholm: Research Institute of Industrial Economics (IFN).

Daniel Waldenström

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Interdisciplinary European Studies

The European Union and the Return of the Nation State

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This book explores the complex and ever-changing relationship between the European Union and its member states. The recent surge in tension in this relationship has been prompted by the actions of some member state governments as they question fundamental EU values and principles and refuse to implement common decisions seemingly on the basis of narrowly defined national interests.

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