Bunching Estimation of Elasticities Using Stata

21 Pages Posted: 9 Jul 2021

See all articles by Marinho Bertanha

Marinho Bertanha

University of Notre Dame - Department of Economics

Andrew H. McCallum

Board of Governors of the Federal Reserve System

Alexis Payne

Board of Governors of the Federal Reserve System

Nathan Seegert

University of Utah - Department of Finance

Date Written: January, 2021

Abstract

A continuous distribution of agents that face a piecewise-linear schedule of incentives results in a distribution of responses with mass points located where the slope (kink) or intercept (notch) of the schedule changes. Bunching methods use these mass points to estimate an elasticity parameter, which summarizes agents' responses to incentives. This article introduces the command bunching, which implements new non-parametric and semi-parametric identification methods for estimating elasticities developed by Bertanha et al. (2021). These methods rely on weaker assumptions than currently made in the literature and result in meaningfully different estimates of the elasticity in various contexts.

JEL Classification: C14, H24, J20

Suggested Citation

Bertanha, Marinho and McCallum, Andrew H. and Payne, Alexis and Seegert, Nathan, Bunching Estimation of Elasticities Using Stata (January, 2021). FEDS Working Paper No. 2021-6, Available at SSRN: https://ssrn.com/abstract=3881615 or http://dx.doi.org/10.17016/FEDS.2021.006

Marinho Bertanha (Contact Author)

University of Notre Dame - Department of Economics ( email )

Notre Dame, IN 46556
United States

Andrew H. McCallum

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

HOME PAGE: http://www.andrewhmccallum.com

Alexis Payne

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Nathan Seegert

University of Utah - Department of Finance ( email )

David Eccles School of Business
Salt Lake City, UT 84112
United States

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