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Labour supply modelling in Italy when Minimum Income Scheme is an option

  • Narazani, Edlira
  • Shima, Isilda

In this paper we analyze the effects of Minimum Guaranteed Income (MGI) schemes on labour supply of Italian married couples by applying a behavioural micro-simulation tax-benefit model. The Tax-Benefit Model applied is the static micro-simulation model of EUROMOD. A household labour supply model is simulated with different tax rules where MGI is an option. The simulated tax regimes are Negative Income Tax (NIT), Workfare Tax (WF) and Universal Basic Income (UBI). These exercises of behavioural micro-simulation tax-benefit are performed at national and regional level. Our main finding is that changes in labour supply due to these tax-transfer rules are small and this is in favour of such income support policies. Concerning tax-transfer rules without hour’s constraint, such as UBI and NIT, they imply labour disincentives more in the South than in the North of the country, and the effect is amplified with the increase of generosity level. Considering the welfare effects of these tax-transfer rules, we find that there are more “winners†than “losers†in the south than in the north as there are more households participating in these MGI schemes due to their low income status.

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File URL: https://www.iser.essex.ac.uk/research/publications/working-papers/euromod/em6-08.pdf
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Paper provided by EUROMOD at the Institute for Social and Economic Research in its series EUROMOD Working Papers with number EM6/08.

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Date of creation: 01 Jul 2008
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Publication status: published
Handle: RePEc:ese:emodwp:em6-08
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  1. Rolf Aaberge & Ugo Colombino & Steinar Strøm, 2004. "Do more equal slices shrink the cake? An empirical investigation of tax-transfer reform proposals in Italy," Journal of Population Economics, Springer, vol. 17(4), pages 767-785, December.
  2. 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., vol. 14(4), pages 403-22, July-Aug..
  3. Immervoll, Herwig & O'Donoghue, Cathal, 2002. "Welfare benefits and work incentives: an analysis of the distribution of net replacement rates in Europe using EUROMOD, a multi-country microsimulation model," EUROMOD Working Papers EM4/01, EUROMOD at the Institute for Social and Economic Research.
  4. van Soest, Arthur & Das, Marcel & Gong, Xiaodong, 2002. "A structural labour supply model with flexible preferences," Journal of Econometrics, Elsevier, vol. 107(1-2), pages 345-374, March.
  5. Duncan, Alan & Giles, Christopher, 1996. "Labour Supply Incentives and Recent Family Credit Reforms," Economic Journal, Royal Economic Society, vol. 106(434), pages 142-55, January.
  6. Rolf Aaberge & Ugo Colombino & John E. Roemer, 2001. "Equality of Opportunity versus Equality of Outcome in Analysing Optimal Income Taxation Empirical Evidence based on Italian Data," Discussion Papers 307, Research Department of Statistics Norway.
  7. Aaberge, Rolf & Dagsvik, John K & Strom, Steinar, 1995. " Labor Supply Responses and Welfare Effects of Tax Reforms," Scandinavian Journal of Economics, Wiley Blackwell, vol. 97(4), pages 635-59, December.
  8. Massimo Baldini & Stefano Toso & Paolo Bosi, 2002. "Targeting welfare in Italy: old problems and perspectives on reform," Fiscal Studies, Institute for Fiscal Studies, vol. 23(1), pages 51-75, March.
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