Dynamic Bunching Estimation with Panel Data

Marx, Benjamin M. (2018): Dynamic Bunching Estimation with Panel Data.

Abstract

Abstract An increasingly common technique for studying behavioral elasticities uses bunching estimation of the excess mass in a distribution around a price or policy threshold. This paper shows how serial dependence of the choice variable and extensive-margin responses may bias these estimates. It then proposes new bunching designs that take greater advantage of panel data to avoid these biases and estimate new parameters. Standard methods over-reject in simulations using household income data and over-estimate bunching in an application with charities. Designs exploiting panel data provide unbiased bunching estimates, improved heterogeneity analysis, and the ability to estimate extensive-margin responses and long-run effects.

• Item Type: MPRA Paper
• Language: English
• Keywords: bunching, estimation, panel
• Subjects: C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C23 - Panel Data Models ; Spatio-temporal Models; D - Microeconomics > D9 - Intertemporal Choice > D92 - Intertemporal Firm Choice, Investment, Capacity, and Financing; H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H21 - Efficiency ; Optimal Taxation

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