Skip to content

Allow for multiple kinks and notches #1

Description

@trilnick

This came as a feedback several times. Right now only 1 kink or notch are allowed (for notches, a change in MRT is also allowed in the notch). This could have several implications:

  1. In earning_fun.R, a function that takes the "ability" level and returns an earning, more than two tangents to the budgets line could be possibles. Combined with another issue (upward kinks and notches), this calls for a constrained optimization (linear, but not necessarily convex) of the utility. Glancing at what's available, I'm not sure if there is something easy to use. It might be more straight forward to partition the budget set by kink (and notch) points, find the tangent on each one, and then pick the best point. This assumes the solution would be unique, but this is also the case in the function right now (default in case of equality is to bunch at zstar).
  2. Would need to solve the elasticity for multiple kinks and notches. Right now, the kinks are solved by getting the bunching mass and using a simple formula. This might not be appropriate, as potentially several solutions would need to be checked for. Is there even a unique solution? A paper by Bertanha, McCallum, and Seeegart ("Better bunching, nicer notching") seems to have a way to solve this, look it up.
  3. When you have a unique point, you can solve for the average elasticity of labor supply at the point of the notch/kink. Would bunchr return a vector of averages (and CIs if bootstrapping is appplied) or some sort of functional form? Allowing for structure could reduce the dimensionality issue.
  4. Plotting would need to adjust.
  5. bunchApp would need to adjust, or perhaps just keep the simple formulation.

Metadata

Metadata

Assignees

No one assigned

    Labels

    No labels
    No labels

    Projects

    No projects

    Milestone

    No milestone

    Relationships

    None yet

    Development

    No branches or pull requests

    Issue actions