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Discussion Paper Details

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Title: The Dynamic Effects of Personal and Corporate Income Tax Changes in the United States

Author(s): Karel Mertens and Morten O Ravn

Publication Date: September 2011

Keyword(s): fiscal policy, measurement error, narrative identification and tax changes

Programme Area(s): International Macroeconomics

Abstract: This paper estimates the dynamic effects of changes in taxes in the United States. We distinguish between the effects of changes in personal and corporate income taxes using a new narrative account of federal tax liability changes in these two tax components. We develop an estimator in which narratively identified tax changes are used as proxies for structural tax shocks and apply it to quarterly post WWII US data. We find that short run output effects of tax shocks are large and that it is important to distinguish between different types of taxes when considering their impact on the labor market and the major expenditure components.

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Bibliographic Reference

Mertens, K and Ravn, M. 2011. 'The Dynamic Effects of Personal and Corporate Income Tax Changes in the United States'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=8554