A micro-macro approach for the evaluation of fiscal policies: The case of the Italian tax-benefit reform
A comprehensive evaluation of fiscal policy reforms requires a methodology that simultaneously considers their aggregate impact on the economy as a whole as well as their distributional implications at the individual or household level. In this paper, we provide a new link between a fiscal microsimu...
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Published in | Economic modelling Vol. 135; p. 106689 |
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Main Authors | , , , |
Format | Journal Article |
Language | English |
Published |
Elsevier B.V
01.06.2024
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Subjects | |
Online Access | Get full text |
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Summary: | A comprehensive evaluation of fiscal policy reforms requires a methodology that simultaneously considers their aggregate impact on the economy as a whole as well as their distributional implications at the individual or household level.
In this paper, we provide a new link between a fiscal microsimulation model and a macro-econometric model and we analyze the impact of the reform of the Italian tax-benefit system occurred in 2022.
The reform is expected to have a first-round cost of about 15 billion euros due to the tax cut and the increase in child related benefits, with a reduction in inequality of around 0.5 percentage points of Gini index. The second-round effects confirm the reduction in inequality and indicate an initial self-financing effect of about 7%. Our estimates support the importance of integrating micro- and macroeconomic insights for a more accurate assessment of the impact of public policies.
•We provide a new link of a microsimulation model with a Post-Keynesian macro-model.•We use the integrated model to evaluate the 2022 Italian tax-benefit reform.•First round effects highlight an inequality reduction and an efficiency improvement.•Second round effects confirm inequality reduction and show a self-financing effect.•In the medium term the equity-efficiency gain of the reform is reinforced. |
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ISSN: | 0264-9993 1873-6122 |
DOI: | 10.1016/j.econmod.2024.106689 |