Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/69423
Authors: 
Bargain, Olivier
Dolls, Mathias
Immervoll, Herwig
Neumann, Dirk
Peichl, Andreas
Pestel, Nico
Siegloch, Sebastian
Year of Publication: 
2013
Series/Report no.: 
Discussion Paper Series, Forschungsinstitut zur Zukunft der Arbeit 7190
Abstract: 
We assess the effects of U.S. tax policy reforms on inequality by applying a new decomposition method that allows us to disentangle the direct policy effect from the effect of changing market incomes. Over the whole period 1979-2007 the cumulative tax policy effect aggravated income inequality by increasing the income share of the top 20% in contrast to the middle class' share. The tax policy effect accounts for up to 29% of the total change in inequality; its contribution increases up to 41% if we take into account behavioral responses. Using our unique policy effect measure and variation in tax policies across U.S. states and time, we also identify the redistributive intention of policymakers. The estimated effect of partisan politics on the U.S. income distribution is statistically significant and economically important. Republican policymakers increased inequality especially at the top whereas Democrats increased the income share of the bottom 80% of the distribution.
Subjects: 
tax policy
inequality
redistribution
partisan politics
political economy
JEL: 
H23
H31
H53
P16
Document Type: 
Working Paper

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