Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/142120
Authors: 
Dekker, Vincent
Strohmaier, Kristina
Bosch, Nicole
Year of Publication: 
2016
Series/Report no.: 
Hohenheim Discussion Papers in Business, Economics and Social Sciences 05-2016
Abstract: 
This paper presents new empirical evidence on taxpayers' responsiveness to taxation by estimating the compensated elasticity of taxable income with respect to the net-of-tax rate in the Netherlands. Applying the bunching approach introduced by Saez (2010), we find small, but clear evidence of bunching behaviour at the thresholds of the Dutch tax schedule with a precise estimated elasticity of 0.023 at the upper threshold. In line with the literature, we find much larger estimates for women and self-employed individuals, but we can also identify significant bunching behaviour for wage employed individuals which we can attribute to tax deductions for couples. We add to the bunching literature by proposing to rely on the information criteria to determine the counterfactual model, as well as developing an intuitive, data-driven procedure to determine the bunching window.
Subjects: 
Elasticity of Taxable Income
Optimal Bunching Window
JEL: 
H21
H24
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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