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Family Intertemporal Fiscal Incidence: A new Methodology for Assessing Public Policies

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  • Polin, Veronica
  • Sartor, Nicola

Abstract

A correct assessment of public policies requires the analysis of deliberate and involuntary redistribution. Redistributive policies have an interpersonal as well as an intrapersonal dimension. To assess the latter, the entire lifetime of individuals and families has to be taken into consideration. Traditionally, redistribution is analysed with static tax-benefit microsimulation models or on stylised individuals/households. Such tools are inadequate to estimate intrapersonal redistribution. The paper proposes a new methodology for evaluating the lifetime incidence of budgetary policy on families. To do so, the definition of a “family unit” proposed by Ermish and Overton (1985) is used. By explicitly considering jointly all tax and spending programs, including in kind transfers and the supply of public services, the new methodology allows to estimate the overall redistribution of the public budget. Moreover, this approach provides an essential tool for examining in detail how the existing tax-benefit system influences the net fiscal position of different family kinds along their lifecycle. As a first application, the new methodology is applied to Italy to investigate lifetime public support to dependants. Empirical results show that public support is not negligible, representing on average 10 percent of family expenditures. However, support is mainly geared to “old” family types - characterised by an absence of major economic problems and by low female labour market participation. The second part of the research explores the hypothesis that the current low demographic scenario can be characterised by “demographic free-riding”. Conclusions are such that the free-riding hypothesis is accepted. However, the scenario resembles the “positive externality” case more than that of “pure public good”.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 25570.

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Date of creation: Jul 2009
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Handle: RePEc:pra:mprapa:25570

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Keywords: Lifetime fiscal incidence; Child support and fertility;

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  1. Alan J. Auerbach & Jagadeesh Gokhale & Laurence J. Kotlikoff, 1991. "Generational accounts: a meaningful alternative to deficit accounting," Working Paper 9103, Federal Reserve Bank of Cleveland.
  2. Immervoll, Herwig & Kleven, Henrik Jacobsen & Kreiner, Claus Thustrup & Saez, Emmanuel, 2004. "Welfare reform in European countries: a micro-simulation analysis," EUROMOD Working Papers EM1/04, EUROMOD at the Institute for Social and Economic Research.
  3. Francisco J. Gomes & Laurence J. Kotlikoff & Luis M. Viceira, 2008. "Optimal Life-Cycle Investing with Flexible Labor Supply: A Welfare Analysis of Life-Cycle Funds," NBER Working Papers 13966, National Bureau of Economic Research, Inc.
  4. Albert Ando & Sergio Nicoletti-Altimari, 2004. "A micro simulation model of demographic development and households' economic behavior in Italy," Temi di discussione (Economic working papers) 533, Bank of Italy, Economic Research and International Relations Area.
  5. François Bourguignon & Amadéo Spadaro, 2005. "Microsimulation as a tool for evaluating redistribution policies," PSE Working Papers halshs-00590863, HAL.
  6. A. Lans Bovenberg, 2008. "The Life-course Perspective and Social Policies: An Overview of the Issues," CESifo Economic Studies, CESifo, vol. 54(4), pages 593-641, December.
  7. Immervoll, Herwig & Levy, Horacio & Lietz, Christine & Mantovani, Daniela & O'Donoghue, Cathal & Sutherland, Holly & Verbist, Gerlinde, 2006. "Household Incomes and Redistribution in the European Union: Quantifying the Equalising Properties of Taxes and Benefits," Economics Series 184, Institute for Advanced Studies.
  8. Nicola Sartor & Laurence J. Kotlikoff & Willi Leibfritz, 1999. "Generational Accounts for Italy," NBER Chapters, in: Generational Accounting around the World, pages 299-324 National Bureau of Economic Research, Inc.
  9. Nicola Sartor, 2001. "The Long-run Effects of the Italian Pension Reforms," International Tax and Public Finance, Springer, vol. 8(1), pages 83-111, January.
  10. Catherine Hakim, 2003. "A New Approach to Explaining Fertility Patterns: Preference Theory," Population and Development Review, The Population Council, Inc., vol. 29(3), pages 349-374.
  11. Veronica Polin, 2004. "II costo dei figli: una stima svincolata dal benessere," Rivista Internazionale di Scienze Sociali, Vita e Pensiero, Pubblicazioni dell'Universita' Cattolica del Sacro Cuore, vol. 112(1), pages 79-108.
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