Q1. What are the contributions in "The case for nit+ft in europe. an empirical optimal taxation exercise" ?
The authors present an exercise in empirical optimal taxation for European countries from three areas: Southern, Central and Northern Europe.
The case for NIT+FT in Europe. An empirical optimal taxation exercise
TL;DR: In this paper, the authors presented an empirical optimal taxation approach to a negative tax with flat tax reform for a sample of eight European countries: Austria, Belgium, France, Germany, Ireland, Italy, Luxembourg and the United Kingdom.
About: This article is published in Economic Modelling.The article was published on 2018-11-01 and is currently open access. It has received 8 citations till now. The article focuses on the topics: Negative income tax & Optimal tax.
Summary (2 min read)
Jump to: [2. The alternative policies] – [4.1 Household preferences and choices] – [D ] – [4.2 Data] – [SMRS e e] – [4.5. Identifying the optimal policies] and [5. Results]
2. The alternative policies
- Note that GNIT is by definition more general than the other NIT special cases.
- Yet it is important to define the optimal design of the special cases: although necessarily not superior to GNIT according to the Social Welfare criterion, they might be more attractive than GNIT according to other dimensions that are not taken into account by the Social Welfare function.
4.1 Household preferences and choices
- Households can choose within an opportunity set containing jobs or activities characterized by hours of work h, sector of market job s (wage employment or self-employment) and other characteristics (observed by the household but not by us).
- The authors define h as a vector with one element for the singles and two elements for the couples,.
D
- For couples, i D contains two analogous sets of variables, one for each partner.
- The parameter estimates of the behavioral models for singles and couples for six countries (Belgium, France, Ireland, Italy.
4.2 Data
- The datasets used in the analysis are the EUROMOD input data based on the European Union Statistics on Income and Living Conditions (EU-SILC) for the year 2010.
- The input data provide all required information on demographic characteristics and human capital, employment and wages of household members, as well as information about various sources of non-labour income.
- The authors apply common sample selection criteria for all countries under study by selecting individuals in the age range 18-65 who are not retired or disabled.
- Then EUROMOD 4 provides calculations of household-level tax and transfer liabilities given the household characteristics and gross incomes according the existing tax and transfer rules.
- The target population consists of all private households throughout the national territory in every country.
SMRS e e
- The simulation results presented in Section 5 are based on 0.05.
- Absolute indexes are less popular than relative indexes (e.g. Gini's or Atkinsos's), although there is no strict logical or economical motivation for preferring one rather than the other.
- 7 Blundell and Shephard (2012) adopt a social welfare index which turns out to be very close to Kolm's.
- Their main motivation for their index seems to be the computational convenience, since it handles negative numbers (random utility levels, in their case).
- The authors motivation in choosing Kolm's index is analogous.
4.5. Identifying the optimal policies
- It is important to keep in mind that the simulated policies differ from the current policies with respect to many dimensions.
- First, the authors simulate policies with a FT, while all the countries included in the present exercise adopt increasing marginal tax rates.
- In general, while the current systems might be somehow close to CBI or IWB or other versions of NIT-like mechanism, they are much more complicated.
- The comparison of the reforms to the current system is informative upon the effects of the reformed budget sets, including the effects of the universal and permanent extention to the whole population.
- It is not directly informative upon dimensionssuch as the administration costswhich are not represented in their microeconometric model.
5. Results
- The Tablesone for each countryshow, for each of the policies considered, the optimal tax-transfer parameters, the average individual labour supply, the household poverty rate, the percentage of household winners with respect to the current system and the change in the money-metric social welfare as percentage of the average household available income.
- Labour supply is measured by average annual hours of work (including the zero hours of the non-employed).
- The poverty rate is the percentage of households with available equivalized income below 60% of the median equivalized income.
- Let W0 and WP respectively the Social Welfare levels attained under the current regime and under a certain policy.
- Note that they are monetary measures .
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Figures (15)
Table A.12 – Maximum likelihood estimates – singles (Ireland) 
Table A.4 – Maximum likelihood estimates – singles (Belgium) 
Table A.8 – Maximum likelihood estimates – singles (France) 
Table A11. – Maximum likelihood estimates – couples (Ireland) 
Table 1. Optimal CBI, GNIT, UBI and IWB with k = 0.05 for Italy 
Table 2. Optimal CBI, GNIT, UBI and IWB with k = 0.05 for Belgium 
Table A.1 – Maximum likelihood estimates – couples (Italy) 
Table A.6 – Maximum likelihood estimates – singles (Luxembourg) 
Fig. 1d. An example of IWB 
Table 4. Optimal CBI, GNIT, UBI and IWB with k = 0.05 for France 
Table 3. Optimal CBI, GNIT, UBI and IWB with k = 0.05 for Luxembourg 
Table A.10 – Maximum likelihood estimates – singles (UK) 
Table A.2 – Maximum likelihood estimates – singles (Italy) 
Table 6. Optimal CBI, GNIT, UBI and IWB with k = 0.05 for Ireland 
Table 5. Optimal CBI, GNIT, UBI and IWB with k = 0.05 for UK
Citations
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01 Jan 2007
TL;DR: Van Parijs as mentioned in this paper presents an alternative vision of the just society: a capitalist society offering a substantial and unconditional basic income to all its members, and reveals a new ideal of a free society and its meaning in the real world.
Abstract: Capitalist societies are full of unacceptable inequalities. Freedom is of paramount importance. These two convictions, widely shared around the world, seem to be in direct contradiction with each other. Fighting inequality jeopardizes freedom, and taking freedom seriously boosts inequality. Can this conflict be resolved? In this ground-breaking book, Philippe Van Parijs sets a new and compelling case for a just society. Assessing and rejecting the claims of both socialism and conventional capitalism, he presents a clear and compelling alternative vision of the just society: a capitalist society offering a substantial and unconditional basic income to all its members. Not just an exercise in political theory, this book reveals a new ideal of a free society and its meaning in the real world by drawing out its policy implications. It is essential reading for anyone concerned about the just society and the welfare state as we move into the twenty-first century.
21 citations
TL;DR: In this paper, the authors present empirical evidence from studies over the last few decades on the effects of implementation of a UBI on employment, and they apply the PRISMA methodology to better judge their validity and ensure maximum reliability of the results by avoiding biases and making the work reproducible.
Abstract: The objective of this article is to determine, as conclusively as possible, if the implementation of a Universal Basic Income (UBI) would lead to a significant reduction in the working age population labour supply. If this were true, implementation of a UBI may not be sustainable. To do this, we will compile empirical evidence from studies over the last few decades on the effects of implementation of a UBI on employment. We apply the PRISMA methodology to better judge their validity, which ensures maximum reliability of the results by avoiding biases and making the work reproducible. Given that the methodologies used in these studies are diverse, they are reviewed to contextualize the results taking into account the possible limitations detected in these methodologies. While many authors have been writing about this issue citing experiences or experiments, the added value of this article is that it performs a systematic review following a widely tested scientific methodology. Over 1200 documents that discuss the UBI/employment relationship have been reviewed. We found a total of 50 empirical cases, of which 18 were selected, and 38 studies with contrasted empirical evidence on this relationship. The results speak for themselves: Despite a detailed search, we have not found any evidence of a significant reduction in labour supply. Instead, we found evidence that labour supply increases globally among adults, men and women, young and old, and the existence of some insignificant and functional reductions to the system such as a decrease in workers from the following categories: Children, the elderly, the sick, those with disabilities, women with young children to look after, or young people who continued studying. These reductions do not reduce the overall supply since it is largely offset by increased supply from other members of the community.
14 citations
Posted Content•
TL;DR: In this paper, the authors develop a unifying framework for optimal income taxation in multi-sector economies with general patterns of externalities, where agents are characterized by an N-dimensional skill vector corresponding to intrinsic abilities in N potentially externality-causing activities.
Abstract: We develop a unifying framework for optimal income taxation in multi-sector economies with general patterns of externalities. Agents in this model are characterized by an N-dimensional skill vector corresponding to intrinsic abilities in N potentially externality-causing activities. The private return to each activity depends on individual skill and an aggregate activity-specific return, which is a fully general function of the economy-wide distribution of activity-specific efforts. We show that the N dimensional heterogeneity can be collapsed to a one-dimensional, endogenous statistic sufficient for screening. The optimal tax schedule features a multiplicative income specific correction to an otherwise standard tax formula. Because externalities change the relative returns to different activities, corrective taxes induce changes in the across activity allocation of effort. These relative return effects cause the optimal correction to diverge, in general, from the Pigouvian tax that would align private and social returns. We characterize this divergence and its implications for the shape of the tax schedule both generally and in a number of applications, including externality free economies, increasing and decreasing returns to scale, zero-sum activities such as bargaining or rent extraction, and positive or negative spillovers.
9 citations
TL;DR: In this article , a micro-econometric model is developed and estimated to simulate household labour supply decisions and the implied economic, fiscal and welfare effects, embedded into a numerical optimization routine that identifies the tax-transfer rule that maximizes a social welfare function.
Abstract: In this paper we propose a computational approach to empirical optimal taxation. We develop and estimate a microeconometric model that is run to simulate household labour supply decisions and the implied economic, fiscal and welfare effects. The microsimulation is embedded into a numerical optimization routine that identifies the tax- transfer rule that maximizes a social welfare function. We consider the class of tax- transfer rules where net available income is computed as a 4th degree polynomial transformation of taxable income plus a transfer. We present the results for six European countries: Germany, France, Italy, Luxembourg, Spain and the United Kingdom. For most values of the inequality aversion parameter k that characterizes the social welfare function, the optimized rules provide a higher social welfare than the current rule, with the exception of Luxembourg. The optimized tax- transfer rules are close to a Flat Tax plus a Universal Basic Income (or equivalently a Negative Income Tax).
1 citations
TL;DR: In this paper, the effect of a move from joint to individual taxation system using 2,276 couple household living in Luxembourg was studied, where the authors estimate simultaneously labour supply and social assistance participation, exploiting a discrete choice model.
Abstract: We study the effect of a move from joint to individual taxation system using 2,276 couple household living in Luxembourg We estimate simultaneously labour supply and social assistance (RMG) participation, exploiting a discrete choice model We focus on the distributional, work (extensive and intensive margin) incentive, and the social welfare effect of introducing a mandatory individual taxation system in Luxembourg The work incentive of married women increases by 227% in intensive margin and 258% in extensive margin after the reform The incentive of married men is almost zero Equivalised disposable income, after the behavioural adjustment, decreases on average 21 per cent After adjustments to direct and indirect taxes, the net revenue-neutral result is a budget surplus for the central government of around €10 million
1 citations
Additional excerpts
...For instance, Islam & Colombino (2018), Aaberge and Colombino (2013) and many others adopt a procedure that consists of using a common utility function as an argument of the social welfare function following Deaton and Muelbauer (1980) approach18....
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...Islam & Colombino (2018)....
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References
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TL;DR: In this article, the authors explore the implications of the procedure used to build the choice set (fixed alternatives vs sampled alternatives) accounting or not accounting for a different availability of alternatives, and show that the way the choice sets is represented seems to have little impact on the fitting of observed values, but a more significant and important impact on out-of-sample prediction performance.
Abstract: During the last two decades, the discrete-choice modelling of labour supply decisions has become increasingly popular, starting with Aaberge et al. (1995) and van Soest (1995). Within the literature adopting this approach there are however two potentially important issues that are worthwhile analyzing in their implications and that so far have not been given the attention they might deserve. A first issue concerns the procedure by which the discrete alternatives are selected to enter the choice set. For example van Soest (1995) chooses (non probabilistically) a set of fixed points identical for every individual. This is by far the most widely adopted method. By contrast, Aaberge et al. (1995) adopt a sampling procedure suggested by McFadden (1978) and also assume that the choice set may differ across the households. A second issue concerns the availability of the alternatives. Most authors assume all the values of hours-of-work within some range [0, H] are equally available. At the other extreme, some authors assume only two or three alternatives (e.g. non-participation, part-time and full-time) are available for everyone. Aaberge et al. (1995) assume instead that not all the hour opportunities are equally available to everyone; they specify a probability density function of opportunities for each individual and the discrete choice set used in the estimation is built by sampling from that individual-specific density function. In this paper we explore by simulation the implications of - the procedure used to build the choice set (fixed alternatives vs sampled alternatives) - accounting or not accounting for a different availability of alternatives. The way the choice set is represented seems to have little impact on the fitting of observed values, but a more significant and important impact on the out-of-sample prediction performance.
42 citations
TL;DR: In this paper, the authors apply individual welfare measures in the context of preference heterogeneity, derived from structural labour supply models, to preserve preference heterogeneity in the normative step of the analysis.
Abstract: We apply recently proposed individual welfare measures in the context of preference heterogeneity, derived from structural labour supply models. Contrary to the standard practice of using reference preferences and wages, these measures preserve preference heterogeneity in the normative step of the analysis. They also make the ethical priors, implicit in any interpersonal comparison, more explicit. Information on preference heterogeneity is obtained from a structural discrete choice labour supply model for married women estimated on microdata from the Socio Economic Panel in Germany. We construct welfare orderings of households according to the different metrics, each embodying different ethical choices concerning the treatment of preference heterogeneity in the consumption-leisure space and provide empirical evidence about the sensitivity of the welfare orderings to different normative principles. We also discuss how sensitive the assessment of a tax reform is to the choice of different metrics.
37 citations
"The case for NIT+FT in Europe. An e..." refers background in this paper
...Decoster and Haan (2015) provide an empirical application of Fleurbaey’s ethical criteria....
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Posted Content•
TL;DR: In this paper, the authors present an approach to identify optimal income tax rules according to various social welfare criteria, keeping fixed the total net tax revenue, by iteratively running the model until a given social welfare function attains its maximum under the constraint of keeping constant the total tax revenue.
Abstract: The purpose of this paper is to present an exercise where we identify optimal income tax rules according to various social welfare criteria, keeping fixed the total net tax revenue. To this end, we estimate a microeconomic model with 78 parameters that capture heterogeneity in consumptionleisure preferences for singles and couples as well as in job opportunities across individuals based on detailed Norwegian household data for 1994. For any given tax rule, the estimated model can be used to simulate the labour supply choices made by single individuals and couples. Those choices are therefore generated by preferences and opportunities that vary across the decision units. Differently from what is common in the literature, we do not rely on a priori theoretical optimal taxation results, but instead we identify optimal tax rules – within a class of 9-parameter piece-wise linear rules - by iteratively running the model until a given social welfare function attains its maximum under the constraint of keeping constant the total net tax revenue. The parameters to be determined are an exemption level, four marginal tax rates, three “kink points” and a lump sum transfer that can be positive (benefit) or negative (tax). We explore a variety of social welfare functions with differing degree of inequality aversion. All the social welfare functions turn out to imply an average tax rate lower than the current 1994 one. Moreover, all the optimal rules imply – with respect to the current rule – lower marginal rates on low and/or average income levels and higher marginal rates on relatively high income levels. These results are partially at odds with the tax reforms that took place in many countries during the last decades. While those reforms embodied the idea of lowering average tax rates, the way to implement it has typically consisted in reducing the top marginal rates. Our results instead suggest to lower average tax rates by reducing marginal rates on low and average income levels and increasing marginal rates on very high income levels.
34 citations
TL;DR: The authors analyzes the impact of a recent recommendation made by Quebec's Comite consultatif de lutte contre la pauvrete and l'exclusion sociale to guarantee every individual an income equal to 80 percent of Statistics Canada's Market Basket Measure (MBM).
Abstract: Dans cet article, nous analysons les effets d’une proposition recente du Comite consultatif de lutte contre la pauvrete et l’exclusion sociale du Quebec visant a garantir a chaque personne un revenu egal a 80 % de la mesure du panier de consommation (MPC) de Statistique Canada. Selon cette recommandation, les travailleurs ayant un revenu au moins equivalent a 16 heures de travail au salaire minimum auraient alors droit a 100 % de la MPC. Nous examinons ensuite trois variantes de cette recommandation : a) l’augmentation de 16 a 30 heures du seuil d’atteinte de la pleine valeur de la MPC; b) un revenu garanti egal a 100 % de la MPC, et c) une subvention salariale de 3 $ l’heure pour les personnes retournant sur le marche du travail. Pour faire ces analyses, nous estimons un modele structurel d’offre de travail qui tient compte du systeme fiscal et nous utilisons les parametres estimes pour prevoir l’offre de travail d’un echantillon representatif de la population. Nos simulations montrent que l’application de la proposition originale aurait d’importants impacts negatifs sur le taux de participation au marche du travail des individus a faible revenu, et que son cout depasserait 2 milliards de dollars. L’augmentation du seuil (a) aurait peu d’impact sur les effets de la proposition de depart. Par contre, assurer un revenu minimum egal a 100 % de la MPC (b) aurait des impacts importants. Nous montrons ainsi que, contrairement a ce que l’on croit generalement, les mecanismes visant a assurer un revenu garanti peuvent avoir pour effet d’accroitre l’incidence du faible revenu plutot que de la reduire. Abstract: This paper analyzes the impact of a recent recommendation made by Quebec’s Comite consultatif de lutte contre la pauvrete et l’exclusion sociale to guarantee every individual an income equal to 80 percent of Statistics Canada’s Market Basket Measure (MBM). Workers with earnings at least equivalent to 16 hours at the minimum wage would be entitled to 100 percent of the MBM. We also investigate the impact of three alternative proposals: (a) a change in the above hours cut-off from 16 to 30 hours; (b) a guaranteed income equal to 100 percent of the MBM, irrespective of earnings; and (c) a $3/hour conditional wage subsidy. To do this, we first estimate a structural labour supply model using the existing tax code and predict the labour supply of a representative sample of individuals based upon the parameter estimates of the model. Simulations show that the original recommendation would have strong negative impacts on participation rates of low earners and that its cost would exceed $2 billion. Increasing the hours cut-off is predicted to have little impact beyond that of the original recommendation. Providing a guaranteed income equivalent to 100 percent of the MBM, on the other hand, would have a large impact. We find that contrary to what is usually assumed, guaranteed income schemes may increase the incidence of low income rather than decrease it.
34 citations
"The case for NIT+FT in Europe. An e..." refers background in this paper
...…theoretical models (e.g. Besley 1990, Saez 2002, FittzRoy and Jin 2015), with microsimulation models (e.g. Scutella 2004, Horstschräer et al. 2010, Clavet et al. 2013, Jensen et al. 5 2014, Colombino 2015b, and Sommer 2016) and with dynamic general equilibrium models (e.g. Van der Linden 2004,…...
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