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Jens 'n' Frens
Idle thoughts of a relatively libertarian Republican in Cambridge, MA, and whomever he invites. Mostly political.
"A strong conviction that something must be done is the parent of many bad measures." -- Daniel Webster
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Thursday, June 02, 2011 :::
There's this story going around that empirical economists have found that marginal tax rates don't have incentive effects, which is odd both in light of common sense and in light of the Romers' research on Keynesian multipliers. Without looking at the details of the new study, I assumed they were either looking at different taxes or, more likely, using a weak test (here's a basic statistical inference lesson: you never really find "no effect" because you can never infer from a sample that a particular population value is exactly zero, or exactly anything else. You may have too little evidence to find an effect - i.e., you may not be able to rule out zero - and if your statistical test has enough power, you can find that the effect, if any, is very small).
But Megan McArdle notes that the source of this new chatter does not really find that rates don't matter, it finds that the US tax code has enough loopholes that statutory tax rate changes don't have large effects on actual tax rates. This interpretation suggests somewhat different public policy implications.Labels: economics, statistics
::: posted by Steven at 10:44 AM
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