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Title: The Ability Gradient in Bunching

Author(s): Spencer Bastani and Daniel Waldenström

Publication Date: April 2020

Keyword(s): ability, bunching, Complexity, optimal taxation and skills

Programme Area(s): Public Economics

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.

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Bibliographic Reference

Bastani, S and Waldenström, D. 2020. 'The Ability Gradient in Bunching'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=14599