From Pantaleoni's «Teoria della traslazione dei trubuti» to the Thirties: The Legacy of the Italian Tradition

The paper presents a survey of some original contributions by the most prominent Italian authors in the field of shifting and incidence of taxation. Starting from a historical evolution of the doctrine, attention focuses on those Italian authors who more closely anticipated the most recent developments. Their contributions are grouped according to two original features, namely the general equilibrium framework and formal rigour. Under the first heading we address the definition of the problem given in general equilibrium terms by Sensini, Einaudi’s criticism of the theory, embraced by his contemporaries, of the amortisation of a general tax, and the remark by De Viti de Marco on the necessity to integrate incidence analysis with the effects of the spending of tax revenues. The heading formal rigour encompasses two distinct features: high formalisation, exemplified with works by Barone, and the methodological rigour of the works of Pantaleoni and Conigliani, who derive general laws of tax shifting through strict deductive reasoning from general economic principles. The dispute on the terminology to adopt for tax shifting and incidence is also reviewed in this context. The paper then examines whether these original contributions were known and shared in Italy and abroad. It emerges that the authors reviewed here enjoyed a rather impressive reputation abroad, in particular with extensive discussion and general acceptance of the contributions by Einaudi and De Viti de Marco. It is also pointed out that the awareness displayed in Barone and Sensini of the complexity and limitations imposed by general equilibrium analyses has been interpreted since then as a justification for the use of partial equilibrium methodology. Finally, in spite of the general equilibrium attitude found in most of the above authors, the paper proposes a tentative explanation for the sparsity of present-day applied general equilibrium works in Italy, as compared to the flourishing of such studies in English-language literature after the pioneering paper by Harberger. In our opinion, the Italian approach has on the one hand overlooked the theoretical improvement brought about by the Harberger model, which yields the exact influence and relative weight of several parameters on the effects brought about by any tax; on the other hand, from an empirical point of view, Italian studies have emphasised the limitations of this methodology without appreciating the usefulness of computable general equilibrium models, seen as the natural evolution of the Harberger model, for the analysis of the effects of tax reforms in real economies.