Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/314497 
Year of Publication: 
2025
Series/Report no.: 
IZA Discussion Papers No. 17600
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
This paper tests whether partially unemployed workers value future preserved benefits when they bunch at the kink of the unemployment insurance benefit-withdrawal schedule. I extend the bunching formula of Saez (2010) to a dynamic setting that accounts for the value of future benefits tied to taxation. This yields new tests of tax-benefit linkage based on bunching heterogeneity. I verify in quasi-experiments that UI extension programs that decrease the value of future benefits lead to more bunching and to lower labor supply. Last, a quantification exercise of the dynamic bunching formula provides extra support for a strong tax-benefit linkage.
Subjects: 
tax-benefit linkage
bunching
unemployment insurance
JEL: 
J65
H24
H31
Document Type: 
Working Paper

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