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Public finance consolidation and fairness across living generations: the case of Italy

  • Paolo Pertile

    ()

    (Department of Economics (University of Verona))

  • Veronica Polin

    ()

    (Department of Economics (University of Verona))

  • Pietro Rizza

    ()

    (Bank of Italy)

  • Marzia Romanelli

    ()

    (Bank of Italy)

The paper is a contribution to the study of the redistributive impact of public sector intervention across living generations. We aim to work on a comprehensive approach, so that reforms involving several taxation and spending programmes, possibly implemented over several years, may be assessed. By adapting methods from the generational accounting literature, we investigate the impact on fairness between living generations of fiscal policies undertaken in Italy between 1990 and 2008. Large intergenerational differences exist in net tax rates calculated over the residual lifetime horizon, which tend to be substantially higher for young generations. Pension reforms introduced in the '90s play a major role in explaining these differences. We conclude that a significant contribution to the sustainability of these reforms might have come at the price of an unequal distribution of sacrifices across living generations. Awareness of these differences could help in designing additional consolidation efforts in the perspective of achieving intergenerational fairness in Italy.

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Paper provided by University of Verona, Department of Economics in its series Working Papers with number 04/2012.

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Length: 20
Date of creation: Jan 2012
Date of revision:
Handle: RePEc:ver:wpaper:04/2012
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  1. Daniele Franco & Jagadeesh Gokhale & Luigi Guiso & Laurence J. Kotlikoff & Nicola Sartor, 1992. "Generational accounting: the case of Italy," Working Paper 9208, Federal Reserve Bank of Cleveland.
  2. Boldrin, Michele & Montes, Ana, 2002. "The Intergenerational State: Education and Pensions," CEPR Discussion Papers 3275, C.E.P.R. Discussion Papers.
  3. Hans Fehr & Laurence J. Kotlikoff, 1995. "Generational Accounting in General Equilibrium," NBER Working Papers 5090, National Bureau of Economic Research, Inc.
  4. Antoine Bommier & Ronald Lee & Timothy Miller & Stephane Zuber, 2004. "Who Wins and Who Loses? Public Transfer Accounts for US Generations Born 1850 to 2090," NBER Working Papers 10969, National Bureau of Economic Research, Inc.
  5. Diamond, Peter, 1996. "Generational Accounts and Generational Balance: An Assessment," National Tax Journal, National Tax Association, vol. 49(4), pages 597-607, December.
  6. Daniele Franco, 2002. "Italy: A Never-Ending Pension Reform," NBER Chapters, in: Social Security Pension Reform in Europe, pages 211-262 National Bureau of Economic Research, Inc.
  7. 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.
  8. Louise Sheiner & David M. Cutler, 2000. "Generational Aspects of Medicare," American Economic Review, American Economic Association, vol. 90(2), pages 303-307, May.
  9. Pietro A. Vagliasindi & Marzia Romanelli & Carlo Bianchi, 2004. "Reforming The Italian Pension System In The Xxi Century: The Issue Of Seniority Pensions Once Again," Advances in Complex Systems (ACS), World Scientific Publishing Co. Pte. Ltd., vol. 7(02), pages 241-264.
  10. Björklund, Anders & Palme, Mårten, 1997. "Income Redistribution within the Life Cycle versus between Individuals: Empirical Evidence Using Swedish Panel Data," SSE/EFI Working Paper Series in Economics and Finance 197, Stockholm School of Economics.
  11. Gerdtham, Ulf-G. & Jonsson, Bengt, 2000. "International comparisons of health expenditure: Theory, data and econometric analysis," Handbook of Health Economics, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 1, pages 11-53 Elsevier.
  12. 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.
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