Advancement to Candidacy Presentation: “The Incidence of the Personal Income Tax. Evidence from Uruguay”, Matías Strehl Pessina, UC Santa Barbara

Speaker

Matías Strehl Pessina, PhD Student, UC Santa Barbara

Biography

Matías Strehl-Pessina is a fourth-year PhD student in Economics at UCSB. He obtained his BA and Master’s degree in Economics from Universidad de la República, in Uruguay, as well as a Master’s degree in Economics at UCSB. His research focuses primarily on Public Economics, Labor economics, and Political Economy, with special focus on inequality. His current research focuses on the effect of tax policies on different aspects of the economy--such as income inequality and the wage distribution-- and on individuals and firms’ behavior. His research also focuses on trying to understand what shapes people's preferences for redistribution. Finally, he is interested in economic mobility, opportunity, and its main determinants. He has also a keen interest in sports, particularly in futbol (soccer), tennis, and table tennis.

Event Details

Matías Strehl Pessina will be presenting his Advancement to Candidacy paper, “xxx”. To access the Advancement paper, you must have an active UCSB NetID and password.

Abstract and JEL Codes

This paper investigates the impact of Uruguay's 2007 reform to the Personal Income Tax (PIT) system, which disproportionately increased the Average Tax Rate (ATR) for high-income workers while leaving others with relatively lower income largely unaffected. Utilizing an event-study approach, we examine the reform's effect on pre-tax wages and labor market behaviors across different income groups. Our findings show that, despite the substantial tax increase, workers did not shift the tax burden to employers, indicating that statutory and economic incidence align. When top earners are left out of the analysis, this effect is precisely estimated around zero in each of the five years after the reform. Workers responded by reducing the number of jobs held, leading to a corresponding decline in overall earnings. Our heterogeneity analysis reveals that some workers, particularly those in large firms and the Health sector, are able to shift part of the tax burden to firms through higher wages. In contrast, top-income earners and those in small firms experienced a negative effect on earnings and wages, suggesting that non-real responses, such as income-shifting or under-reporting, may play a role.

JEL Codes: H22, H24
Keywords: tax incidence, personal income tax, wages