Marginal Tax Rates and Income: New Time Series Evidence*

Mertens, Karel; Olea, José Luis Montiel

doi:10.1093/qje/qjy008

Cited by 140 publications

(195 citation statements)

References 66 publications

(198 reference statements)

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“…The red line corresponds to the median response and the shaded areas correspond to 68% confidence bands, which were computed using a moving block bootstrap method. The first-stage regression F-test has a value of 18.29, and its robust R 2 is 5.27% [Colour figure can be viewed at wileyonlinelibrary.com] The algorithm of the residual-based moving block bootstrap we use is the same as in Mertens and Olea (2018), which uses the same procedure as Jentsch and Lunsford but without the centering of the proxies in step 4 of their procedure. To initialize the algorithm we choose a block of length and compute the number of blocks N = [T∕ ], where [.]…”

Section: Figurementioning

confidence: 99%

Monetary policy, housing rents, and inflation dynamics

Dias

Duarte

2019

J of Applied Econometrics

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Summary In this paper we study the effect of monetary policy shocks on housing rents. Our main finding is that, in contrast to house prices, housing rents increase in response to contractionary monetary policy shocks. We also find that, after a contractionary monetary policy shock, rental vacancies and the homeownership rate decline. This combination of results suggests that monetary policy may affect housing tenure decisions (own versus rent). In addition, we show that, with the exception of the shelter component, all other main components of the consumer price index (CPI) either decline in response to a contractionary monetary policy shock or are not responsive. These findings motivated us to study the statistical properties of alternative measures of inflation that exclude the shelter component. We find that measures of inflation that exclude shelter have most of the statistical properties of the widely used measures of inflation, such as the CPI and the price index for personal consumption expenditures, but have higher standard deviations and react more to monetary policy shocks. Finally, we show that the response of housing rents accounts for a large proportion of the “price puzzle” found in the literature.

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Section: Figurementioning

confidence: 99%

Monetary policy, housing rents, and inflation dynamics

Dias

Duarte

2019

J of Applied Econometrics

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“…6). Inflation also raised progressivity as it increased effective marginal tax rates significantly more for top income earners-see Figure 2 in Mertens and Olea (2018). 16 The decrease in income taxes, added to the increased defense spending and the 1981 recession, resulted in large fiscal deficits, to which the Reagan Administration responded by increasing other taxes, such as the Tax Equity and Fiscal Responsibility Act (TEFRA, 1982) and the Deficit Reduction Act (DEFRA, 1984).…”

Section: A Linear Versionmentioning

confidence: 99%

“…We build a novel time series to measure the progressivity [P] Barro andRedlick (2011) (data: federal, until 1945) and Mertens and Olea (2018) (data: federal, years 1946-2012.…”

Section: A1 Progressivitymentioning

confidence: 99%

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The Heterogeneous Effects of Government Spending: It’s All About Taxes

Ferrière¹,

Navarro

2018

Int. finance discuss. pap.

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This paper investigates how government spending multipliers depend on the distribution of taxes across households. We exploit historical variations in the financing of spending in the U.S. since 1913 to show that multipliers are positive only when financed with more progressive taxes, and zero otherwise. We rationalize this finding within a heterogeneous-household model with indivisible labor supply. The model results in a lower labor responsiveness to tax changes for higher-income earners. In turn, spending financed with more progressive taxes induces a smaller crowding-out, and thus larger multipliers. Finally, we provide evidence in support of the model's cross-sectional implications.

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“…Ferriere and Navarro also find that the effect of government spending on macrovariables is much larger when it is financed with more progressive taxes. Similarly, Barro and Redlick (2011) and Mertens and Montiel Olea (2018) report that significant increases in the federal average marginal income-tax rate are related to wartime.…”

Section: Taxation Schemementioning

confidence: 99%

The Heterogeneous Responses of Consumption between Poor and Rich to Government Spending Shocks

Ma¹

2018

J of Money Credit Banking

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Government spending shocks have substantially different effects on consumers across the income distribution: consumption increases for the poor whereas it decreases for the rich in response to a rise in government expenditure. I shed light on this issue by incorporating a progressive tax scheme and productive public expenditure into a heterogeneous agent model economy with indivisible labor. The model economy is able to successfully match aggregate and disaggregate effects of government spending shocks on consumption. When the government increases its spending and accompanies it by a rise in tax progressivity, the poor are employed and increase their consumption since after‐tax wage rates increase while the rich decrease their consumption because of a fall in after‐tax wage rates.

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Marginal Tax Rates and Income: New Time Series Evidence*

Cited by 140 publications

References 66 publications

Monetary policy, housing rents, and inflation dynamics

Monetary policy, housing rents, and inflation dynamics

The Heterogeneous Effects of Government Spending: It’s All About Taxes

The Heterogeneous Responses of Consumption between Poor and Rich to Government Spending Shocks

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