Identification in Tax-Price Regression Models: The Case of Charitable Giving / Daniel R. Feenberg.

By:

Feenberg, Daniel R

Contributor(s):

National Bureau of Economic Research

Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w0988.Publication details: Cambridge, Mass. National Bureau of Economic Research 1982.Description: 1 online resource: illustrations (black and white)Subject(s):

E - Macroeconomics and Monetary Economics

Online resources:

Available additional physical forms:

Hardcopy version available to institutional subscribers

Abstract: In this paper we use an instrumental variable estimator to exploit sources of independent variation, which allows unbiased estimation of the tax-price elasticity under more general conditions. The estimator is applied to the demand for charitable giving. A charitable giving equation is an appropriate test for this procedure because it represents the purest case of a tax-price coefficient. That is, taxes are the sole source of variance in the price. The deduction is also an important policy issue. In 1982, 1.8 percent of gross income was deducted for this reason, about as much as the capital gains deduction.

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Previous	nber w0985 Union Wage Settlements During a Disinflation /	nber w0986 Social Security and Labor Supply Incentives /	nber w0987 Inflation, Monetary Velocity, and Welfare /	nber w0988 Identification in Tax-Price Regression Models: The Case of Charitable Giving /	nber w0989 The Role of Overlapping-Generations Models in Monetary Economics /	nber w0990 Unionization and Firm Performance: The Impact on Profits, Growth and Productivity /	nber w0991 Oil Prices, Welfare and the Trade Balance: An Intertemporal Approach /	Next

September 1982.

In this paper we use an instrumental variable estimator to exploit sources of independent variation, which allows unbiased estimation of the tax-price elasticity under more general conditions. The estimator is applied to the demand for charitable giving. A charitable giving equation is an appropriate test for this procedure because it represents the purest case of a tax-price coefficient. That is, taxes are the sole source of variance in the price. The deduction is also an important policy issue. In 1982, 1.8 percent of gross income was deducted for this reason, about as much as the capital gains deduction.