elas_equalizer {bunchr} | R Documentation |
Given an elasticity, a budget set, and the earnings of the marginal buncher, calculate the utility at notch point and at marginal buncher's earning, and return the absolute difference. Equating these two utilities helps find the elasticity of the marginal buncher. See equations (3) and (4) at Kelven and Waseem (2013)
elas_equalizer(elas, t1, t2, Tax, zstar, delta_zed, binw)
elas |
elasticity of earnings w.r.t. net-of-tax rate |
t1 |
Tax rate before notch/kink |
t2 |
Tax rate after notch/kink |
Tax |
Height of notch (zero for pure kink) |
zstar |
Place of notch/kink (critical earning point) |
delta_zed |
The notch size |
binw |
Bin width |
Absolute value of utility at zstar+delta_zed minus utility at kink/notch point.
Kleven, H. and Waseem, Mazhar (2013) Using notches to uncover optimization frictions and structural elasticities: Theory and evidence from Pakistan, The Quarterly Journal of Economics 128(2)
elas_equalizer(0.2, 0.1, 0.2, 100, 1000, 200, 20)