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The French do it better. The distributive effect of introducing French family fiscal policies in Italy

Author

Listed:
  • Paolo Brunori

    (Università degli Studi di Firenze)

  • Maria Luisa Maitino

    (Istituto Regionale Programmazione Economia della Toscana)

  • Letizia Ravagli

    (Istituto Regionale Programmazione Economia della Toscana)

  • Nicola Sciclone

    (Istituto Regionale Programmazione Economia della Toscana)

Abstract

Italy has one of the lowest fertility rates in the world. A solution, often advocated to incentivize fertility, could be to reform the Italian fiscal system, taking inspiration from the French fiscal family treatment. This would imply introducing the quotient system, where taxation is not on an individual basis, as in Italy, but is applied to the family as a whole, and the cash benefits provided to families in France. The purpose of our paper is to assess the distributive effects of such a fiscal reform. We estimate these effects using MicroReg, a static microsimulation model that is able to predict the first-order effects of fiscal reforms. We show that a shift to the French income tax system would lead to decreased income inequality and a substantial tax reduction for households with three children, especially those with medium-high income. The new income tax would result in a substantial disincentive to female labor supply, albeit mitigated by greater progressivity in favor of low-income groups with children.

Suggested Citation

  • Paolo Brunori & Maria Luisa Maitino & Letizia Ravagli & Nicola Sciclone, 2019. "The French do it better. The distributive effect of introducing French family fiscal policies in Italy," SERIES 04-2019, Dipartimento di Economia e Finanza - Università degli Studi di Bari "Aldo Moro", revised Oct 2019.
    • Handle: RePEc:bai:series:series_wp_04-2019
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    References listed on IDEAS

    as
    1. M Luisa Maitino & Letizia Ravagli & Nicola Sciclone, 2017. "Microreg: A Traditional Tax-Benefit Microsimulation Model Extended To Indirect Taxes And In Kind Transfers," International Journal of Microsimulation, International Microsimulation Association, vol. 10(1), pages 5-38.
    2. Guy Laroque & Bernard Salanié, 2014. "Identifying The Response Of Fertility To Financial Incentives," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 29(2), pages 314-332, March.
    3. Anne Gauthier, 2007. "The impact of family policies on fertility in industrialized countries: a review of the literature," Population Research and Policy Review, Springer;Southern Demographic Association (SDA), vol. 26(3), pages 323-346, June.
    4. Viktor Steiner & Katharina Wrohlich, 2008. "Introducing Family Tax Splitting in Germany: How Would It Affect the Income Distribution, Work Incentives, and Household Welfare?," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 64(1), pages 115-142, March.
    5. Joris Ghysels & Josefine Vanhille & Gerlinde Verbist, 2011. "A care time benefit as a timely alternative for the non-working spouse compensation in the Belgian tax system," International Journal of Microsimulation, International Microsimulation Association, vol. 4(2), pages 57-72.
    6. Joëlle Sleebos, 2003. "Low Fertility Rates in OECD Countries: Facts and Policy Responses," OECD Labour Market and Social Policy Occasional Papers 15, OECD Publishing.
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    Keywords

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    JEL classification:

    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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