DP14599 The Ability Gradient in Bunching
Author(s): | Spencer Bastani, Daniel Waldenström |
Publication Date: | April 2020 |
Date Revised: | April 2020 |
Keyword(s): | ability, bunching, Complexity, optimal taxation, skills |
JEL(s): | H21, H24, J22, J24 |
Programme Areas: | Public Economics |
Link to this Page: | cepr.org/active/publications/discussion_papers/dp.php?dpno=14599 |
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.