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American Economic Review: Vol. 103 No. 4 (June 2013)

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The Dynamic Effects of Personal and Corporate Income Tax Changes in the United States

Article Citation

Mertens, Karel, and Morten O. Ravn. 2013. "The Dynamic Effects of Personal and Corporate Income Tax Changes in the United States." American Economic Review, 103(4): 1212-47.

DOI: 10.1257/aer.103.4.1212

Abstract

This paper estimates the dynamic effects of changes in taxes in the United States. We distinguish between changes in personal and corporate income taxes and develop a new narrative account of federal tax liability changes in these two tax components. We develop an estimator which uses narratively identified tax changes as proxies for structural tax shocks and apply it to quarterly post-WWII data. We find that short run output effects of tax shocks are large and that it is important to distinguish between different types of taxes when considering their impact on the labor market and on expenditure components.

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Additional Materials

Online Appendix (194.43 KB) | Download Data Set (101.13 KB) | Author Disclosure Statement(s) (42.57 KB)

Authors

Mertens, Karel (Cornell U)
Ravn, Morten O. (U College London)

JEL Classifications

E23: Macroeconomics: Production
E62: Fiscal Policy
H24: Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes
H25: Business Taxes and Subsidies including sales and value-added (VAT)
H31: Fiscal Policies and Behavior of Economic Agents: Household
H32: Fiscal Policies and Behavior of Economic Agents: Firm


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