A large scale OLG model for France, Italy and Sweden: assessing the interpersonal and intrapersonal redistributive effects of public policies

The paper presents a large scale overlapping generation model with heterogeneous agents, where the family is the decision unit. We model a large number of tax and public expenditure (cash and in kind) programmes, so that the equity and efficiency implications of public sector intervention may be assessed in its complexity. We do this for three european countries that show remarkable differences in the design of most of these programmes: France, Italy and Sweden. We show that the model is able to match relevant aggregate and distributional statistics of the three countries we analyse. To illustrate the working of the model, we provide examples of policy experiments that can be simulated. That is, we compare our model economies featuring the current set of public policies implemented in France, Italy and Sweden, with alternative economies where some (all) public finance programs are absent. The comparison is done, looking at the effects on both inequality and individual welfare.