Diffuse Bunching with Lumpy Incomes: Theory and Estimation

We examine the bunching behaviour of individuals in Australia in response to an extra 15 per cent tax on compulsory retirement contributions imposed on those earning more than $ A250,000. We find almost no bunching by wage and salary earners. There is extensive bunching by those with business or trust income. For this group, we estimate an elasticity of taxable income of 0.027. Females and older workers are more likely to bunch. The results suggest that the tax induces a tax planning response but little labour supply response.

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Reference Dependence in the Housing Market

Andersen

Badarinza

Lü

et al. 2022

American Economic Review

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We quantify reference dependence and loss aversion in the housing market using rich Danish administrative data. Our structural model includes loss aversion, reference dependence, financial constraints, and a sale decision, and matches key nonparametric moments, including a “hockey stick” in listing prices with nominal gains, and bunching at zero realized nominal gains. Households derive substantial utility from gains over the original house purchase price; losses affect households roughly 2.5 times more than gains. The model helps explain the positive correlation between aggregate house prices and turnover, but cannot explain visible attenuation in reference dependence when households are more financially constrained. (JEL D12, D91, G51, R21, R31)

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Diffuse Bunching with Lumpy Incomes: Theory and Estimation

Cited by 3 publications

References 35 publications

The division of parental leave: Empirical evidence and policy design

The division of parental leave: Empirical evidence and policy design

Tax Bunching of Very High Earners: Evidence from Australia's Division 293 Retirement Contributions Tax*

Reference Dependence in the Housing Market

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