The aging of the baby boomers: Demographics and propagation of tax shocks

Domenico Ferraro, Giuseppe Fiori

Research output: Contribution to journalArticlepeer-review

3 Scopus citations

Abstract

We study how the changing demographic composition of the US labor force has affected the response of the unemployment rate to marginal tax rate shocks. Using narratively identified tax changes as proxies for structural shocks, we establish that the responsiveness of the unemployment rates to tax changes varies significantly across age groups: the unemployment rate response of the young is nearly twice as large as that of the old. This heterogeneity is the channel through which shifts in the age composition of the labor force impact the response of the unemployment rate to tax cuts. We find that the aging of the baby boomers considerably reduces the effects of tax cuts on aggregate unemployment.

Original languageEnglish (US)
Pages (from-to)167-193
Number of pages27
JournalAmerican Economic Journal: Macroeconomics
Volume12
Issue number2
DOIs
StatePublished - Apr 1 2020

ASJC Scopus subject areas

  • Economics, Econometrics and Finance(all)

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