You are kindly invited to de Economics Department's seminar, where it will be presented the article called "Better diffuse bunching, nicer diffuse notching".

Presents: Andrew McCallum, Senior Economist, Federal Reserve Board of Governors.

"I study agents' responses to changes in the slope or the intercept of a piecewise linear schedule of incentives. Past theory predicts that for increasing marginal income tax rates, for example, many taxpayers will report income exactly at the location where the tax rate increases. Many empirical settings that would in theory predict a mass-point, instead have a diffused mass near the location, or no excess mass at all. I attribute these diffuse mass points to frictions and introduce new theory and new estimation methods to allow these frictions to depend on observables. These new methods are not limited to public finance and apply to a general class of mixture models and any piecewise linear constraints that changes slope or intercept at one potentially heterogeneous location. My method provides elasticity estimates that explicitly control for frictions. I develop a Stata package, bunchmix, and demonstrate my methods in the context of the Earned Income Tax Credit and show that observable covariates account for a substantial share of frictions. Thereby partly answering, “Why Don’t Taxpayers Bunch at Kink Points?”"

The event will be held in a 1605 classroom.

Kind regards,

Research Direction