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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Spencer Bastani

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