Annette Alstadsæter, Norwegian University of Life Sciences (NMBU)
ESOP seminar. Annette Alstadsæter is a Professor at Norwegian University of Life Sciences (NMBU). She will present a paper entitled "Accounting for Business Income in Measuring Top Income Shares: Integrated Accrual Approach Using Individual and Firm Data from Norway" co-authored by Martin Jacob, Wojciech Kopczuk, and Kjetil Telle.
Using linked individual and firm data from Norway, we attribute business income to owners at accrual rather than realization. The effect on measured top income shares varies dramatically depending on the tax regime. After the 2005 tax reform that incentivized retention of earnings within businesses, top 0.1% share more than doubles in some years. Adjusting for retained earnings stabilizes the composition of the top income groups. On the other hand, an alternative approach of imputing retained earnings based on realized dividends performs poorly. These effects are driven by majority owners in closely held firms and facilitated through indirect ownership. We discuss implications of our findings for levels and trends in top income shares observed in other countries.
Read the full paper here [pdf]
Host: Kalle Moene