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README.Rmd
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README.Rmd
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---
output: github_document
title: "`bunchr`: Analyze bunching in a kink or notch setting"
author: "Itai Trilnick"
date: "`r Sys.Date()`"
---
<!-- README.md is generated from README.Rmd. Please edit that file -->
```{r, echo = FALSE}
knitr::opts_chunk$set(
collapse = TRUE,
comment = "#>",
fig.path = "README-"
)
```
The `bunchr` package is meant to help analyze bunching in a labor and public economics setting. `bunchr` allows easy viewing of bunching histograms, creation of counter-factual
distributions, and estimation of the elasticity of earnings w.r.t. the net-of-tax
rate in __kink__ and __notch__ settings. At the time of writing these lines, I am unaware of any other R package doing so. I hope to keep improving this package so
it is useful to many researchers.
To validate the kink analysis, results from `bunchr` are compared with an existing _Stata_ utility function that was used in a peer reviewed article by Chetty,
Friedman, Olsen, and Pistaferry (see vignette). I am happy to get comments
and references to other codes for bunching analysis.
Below are a few words about bunching analysis, kinks, and notches. For more information, references, and examples, please see the package vignettes.
In many cases, tax and welfare programs have points where incentives change in
such way that people are expected to bunch at one side of point. For example,
people are expected to bunch at the point where income tax rates increase,
creating a __kink__ in agents' budget lines. In another case, beneficiaries of
Social Security Disability Insurance in the US are not allowed to work and earn
above a certain dollar amount, and those who cross that threshold risk losing
their benefits. This creates a __notch__ in beneficiaries' budget lines, and
bunching is expected (and seen) at that earning level.
__Kinks__ and __notches__ create opportunities to measure the earning elasticity w.r.t the net-of-tax rate. This parameter is considered sufficient statistic for calculating welfare from changes in tax regimes and welfare programs, and could also be used to devise optimal tax rates.