“Bunching at the Kink…” (Einav, Finkelstein, and Schrimpf 2016) Discussion of “Bunching at the Kink…” (Einav, Finkelstein, and Schrimpf 2016) Matthew J. Notowidigdo Northwestern University, Institute for Policy Research, and NBER NU Interactions Workshop

Summary Simple and underappreciated point: using “excess mass” estimates from bunching at kinks/notches to recover behavioral elasticity is only valid under a specific model (or specific class of models). A very different model could deliver same “excess mass”, but have very different counterfactual predictions. Very cool illustration of this simple point in context of Medicare Part D “donut hole”, where dynamic considerations are important, as emphasized in Aron- Dine et al. 2015 and related work.

Main comments Very neat paper; nice complement to authors’ QJE paper. Another way I thought about paper is that it points to a fundamental under-identification of behavioral elasticity from “excess mass” alone. Authors write that “additional moments could help with model selection”; I agree! Basic point is likely to be useful to keep in mind in many other existing applications of “bunching” methodology. Authors claim Saez-style model is “reasonable” for labor supply decisions, but the Saez-style static model ignores inter-temporal labor supply decisions. Authors claim that bunching “provides [visual] evidence against null hypothesis of no behavioral response.” I will revisit this claim in this discussion.

Outline Statistical/econometric issues with estimating “bunching” and “excess mass” Rejecting null of “no behavioral response” Importance (or non-importance?) of moving the kink around Identification of dynamic model (mapping from “visual” bunching evidence to underlying structural parameters)

Statistical issues with estimating “excess mass” Statistical issue: symmetric? What is delta? Why 2*delta? Why counterfactual density the same to the left? Why is everyone shifting down? Not much formal economic or statistical justification for interpolating density. Rejection of joint hypothesis of no behavioral response and no excess mass of individual heterogeneity. Might sound pedantic, but will return to this.

Rejecting null of “no behavioral response”

Rejecting null of “no behavioral response”

Rejecting null of “no behavioral response”

Importance of moving the kink around

Importance of moving the kink around

Identification of dynamic model

Conclusion Really excited by this paper’s “template” that combines rich structural model with compelling “visual” evidence of behavioral response to kink. Best practice recommendation: being clear about relationship between bunching estimates and identification of structural model. Gentzkow and Shapiro “sensitivity tests” might be useful for improving transparency (e.g., how sensitive are behavioral elasticities to different reduced-form excess mass estimates?). I think we would hope that key elasticity is sensitive to excess mass estimate, otherwise we might be concerned about “hard-wiring” There is recent work on “RD identification away from the cutoff”; is there analogous work that can be done in bunching literature?

Thank you!