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Five Crossroads on the Way to Basic Income: An Italian Tour

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  • Colombino, Ugo

    ()
    (University of Turin)

Abstract

The current Italian income support policies are defective with respect to both efficiency and equity. A more effective design must face five crucial choices: universal vs. categorical policies; transfers vs. subsidies; unconditional vs. means-tested policies; coverage; flat vs. progressive tax rules. Using a microeconometric model and a social welfare methodology, we simulate the effects of 30 versions of three basic types: guaranteed minimum income, unconditional basic income and wage. The simulation preserves fiscal neutrality and adopts a methodology that allows for market equilibrium and ensures a consistent comparative statics interpretation of the results. The social welfare optimal policy is an unconditional transfer coupled with a wage subsidy, with a total benefit amounting to about 70% of the poverty level, or – depending on the social welfare criterion – a pure unconditional transfer amounting to 100% of the poverty level.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 8087.

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Length: 35 pages
Date of creation: Mar 2014
Date of revision:
Handle: RePEc:iza:izadps:dp8087

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Keywords: income support mechanisms; basic income; guaranteed minimum income; wage subsidies; tax reform simulation;

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  1. De Vincenti Claudio & Paladini Ruggero, 2009. "Personal Income Tax Design for Italy: Lessons from the Theory," Rivista italiana degli economisti, Società editrice il Mulino, issue 1, pages 7-46.
  2. R. Aaberge & U. Colombino & T. Wennemo, 2009. "Evaluating Alternative Representations Of The Choice Sets In Models Of Labor Supply," Journal of Economic Surveys, Wiley Blackwell, Wiley Blackwell, vol. 23(3), pages 586-612, 07.
  3. Colombino Ugo & Locatelli Marilena & Narazani Edlira & O'Donoghue Cathal, 2010. "Alternative Basic Income Mechanisms: An Evaluation Exercise With a Microeconometric Model," Basic Income Studies, De Gruyter, De Gruyter, vol. 5(1), pages 1-31, September.
  4. Rolf Aaberge, 2007. "Gini’s nuclear family," Journal of Economic Inequality, Springer, Springer, vol. 5(3), pages 305-322, December.
  5. Aaberge, Rolf & Colombino, Ugo, 2009. "Accounting for Family Background when Designing Optimal Income Taxes: A Microeconometric Simulation Analysis," IZA Discussion Papers 4598, Institute for the Study of Labor (IZA).
  6. Colombino Ugo, 2012. "A microeconometric-computational approach to empirical optimal taxation: outline of a project," Department of Economics and Statistics Cognetti de Martiis. Working Papers, University of Turin 201218, University of Turin.
  7. Colombino, Ugo, 1998. "Evaluating the effects of new telephone tariffs on residential users' demand and welfare. A model for Italy," Information Economics and Policy, Elsevier, Elsevier, vol. 10(3), pages 283-303, September.
  8. John K. Dagsvik, 1996. "Aggregation in Matching Markets," Discussion Papers, Research Department of Statistics Norway 173, Research Department of Statistics Norway.
  9. Atkinson, A B, 1987. "On the Measurement of Poverty," Econometrica, Econometric Society, Econometric Society, vol. 55(4), pages 749-64, July.
  10. Aaberge, Rolf & Flood, Lennart, 2008. "Evaluation of an In-Work Tax Credit Reform in Sweden: Effects on Labor Supply and Welfare Participation of Single Mothers," IZA Discussion Papers 3736, Institute for the Study of Labor (IZA).
  11. Massimo Baldini & Stefano Toso & Paolo Bosi, 2002. "Targeting welfare in Italy: old problems and perspectives on reform," Fiscal Studies, Institute for Fiscal Studies, Institute for Fiscal Studies, vol. 23(1), pages 51-75, March.
  12. Aaberge, Rolf & Dagsvik, John K & Strom, Steinar, 1995. " Labor Supply Responses and Welfare Effects of Tax Reforms," Scandinavian Journal of Economics, Wiley Blackwell, Wiley Blackwell, vol. 97(4), pages 635-59, December.
  13. Ugo Colombine, 2013. "A new equilibrium simulation procedure with discrete choice models," International Journal of Microsimulation, Interational Microsimulation Association, vol. 6(3), pages 25-49.
  14. Diamond, P., 1994. "Optimal Income Taxation: An Exemple with a U-Shaped Pattern of Optimal Marginal Tax Rates," Working papers, Massachusetts Institute of Technology (MIT), Department of Economics 94-14, Massachusetts Institute of Technology (MIT), Department of Economics.
  15. Steinar Str�m & John K. Dagsvik, 2006. "Sectoral labour supply, choice restrictions and functional form," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 21(6), pages 803-826.
  16. Richard Blundell & Andrew Shephard, 2012. "Employment, Hours of Work and the Optimal Taxation of Low-Income Families," Review of Economic Studies, Oxford University Press, vol. 79(2), pages 481-510.
  17. Massimo Baldini & Stefano Toso, 2013. "Sostegno del reddito e lotta alla povertà in Italia: le politiche pubbliche in tempo di crisi," Center for the Analysis of Public Policies (CAPP), Universita di Modena e Reggio Emilia, Dipartimento di Economia Politica 0104, Universita di Modena e Reggio Emilia, Dipartimento di Economia Politica.
  18. Aaberge, Rolf & Colombino, Ugo & Strom, Steinar, 1999. "Labour Supply in Italy: An Empirical Analysis of Joint Household Decisions, with Taxes and Quantity Constraints," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 14(4), pages 403-22, July-Aug..
  19. Besley, Timothy, 1990. "Means Testing versus Universal Provision in Poverty Alleviation Programmes," Economica, London School of Economics and Political Science, London School of Economics and Political Science, vol. 57(225), pages 119-29, February.
  20. Hanming Fang & Michael P. Keane, 2004. "Assessing the Impact of Welfare Reform on Single Mothers," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 35(1), pages 1-116.
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