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: The authors compare the welfare effects of unemployment insurance with an universal basic income (UBI) system in an economy with idiosyncratic shocks to employment, and provide results that show that UI beats UBI for insurance purposes because it is better targeted towards those in need.
Abstract: In this paper we compare the welfare effects of unemployment insurance (UI) with an universal basic income (UBI) system in an economy with idiosyncratic shocks to employment. Both policies provide a safety net in the face of idiosyncratic shocks. While the unemployment insurance program should do a better job at protecting the unemployed, it suffers from moral hazard and substantial monitoring costs, which may threaten its usefulness. The universal basic income, which is simpler to manage and immune to moral hazard, may represent an interesting alternative in this context. We work within a dynamic equilibrium model with savings calibrated to the United States for 1990 and 2011, and provide results that show that UI beats UBI for insurance purposes because it is better targeted towards those in need.
15 citations
"The case for NIT+FT in Europe. An e..." refers background in this paper
...…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, Fabre et al. 2014) with different results....
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01 Jan 2016
10 citations
"The case for NIT+FT in Europe. An e..." refers background in this paper
...…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, Fabre et al. 2014) with different results....
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...…direction somehow opposed to the one taken since the end of 70s: less conditioning, simpler designs and ultimately some form of Unconditional Basic Income (UBI), i.e. a policy based on non-means tested transfers (e.g. van Parijs 1995, Standing 2008, Atkinson 2015, Colombino 2015b, Sommer 2016)....
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Posted Content•
Abstract: A tax shifting from labour income to housing taxation is generally advocated on efficiency grounds However, most of the empirical literature focuses on the distributional implications of property tax reforms without paying much attention to potential consequences on the labour market The aim of this paper is to fill this gap by investigating the effects of a tax shifting from labour income to property, guaranteeing revenue neutrality, and to assess the consequences of labour market equilibrium, both on occupation rates and income distribution We propose to consider a hypothetical tax reform in Italy which uses the revenue of the tax on house property (actually implemented in 2012) for increasing tax credits on low incomes and making them refundable In order to evaluate the reform we have developed a structural model of household labour supply which takes into account the labour market equilibrium conditions Overall, the simulated policy provides a more effective income support and better incentives to work for low wage households and determines an improvement in inequality indexes
10 citations
"The case for NIT+FT in Europe. An e..." refers methods in this paper
...We wish to thank Flavia Coda Moscarola, Francesco Figari and Marilena Locatelli, who provided us the estimation programs, originally written for Coda Moscarola et al. (2014), which have been useful as a basis for developing our programs for the estimation of the microeconometric model....
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...Following Coda-Moscarola et al. (2014) we write the utility function of the i-th household at a (h, s) job as ( , , ; ) ( , ; ) ' ( ) 'i i iU h s h s hε = + επ Y π γ + L λ (2) where: γ and λ are parameters to be estimated; ( , ; )i h sY π is a vector including - household disposable income on a…...
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...Following Coda-Moscarola et al. (2014) we write the utility function of the i-th household at a (h, s) job as ( , , ; ) ( , ; ) ' ( ) 'i i iU h s h s hε = + επ Y π γ + L λ (2) where: γ and λ are parameters to be estimated; ( , ; )i h sY π is a vector including - household disposable income on a (h,s) job given the tax-benefit parametersπ , - the square of the household disposable income defined above - and the product of disposable income and household size (interaction term); Li(h) is a row vector including - the leisure time (defined as the total number of avail ble weekly hours (80) minus the hours of work h) separately of the two partners (for a couple) or of the individual (for a single) - the square of leisure time(s) - and the interaction(s) of leisure time(s) with household disposable income, age of the couple’ partners or of the single, age square and three dummy variables indicating presence of children of different age range (any age, 0-6, 7-10); ε is a random variable that accounts for the effect of unobserved (by the analyst) job characteristics....
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...To deal with this issue, we follow a two-stage procedure presented in Dagsvik and Strøm (2006) and also adopted in Coda-Moscarola et al. (2014)....
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TL;DR: This paper studied three budget-neutral reforms of the German tax and transfer system designed to improve work incentives for people with low incomes: a feasible flat tax reform that provides a basic income equal to the current level of the means-tested unemployment benefit, and two alternative reforms that involve employment subsidies to stimulate participation and full-time work, respectively.
Abstract: We study three budget-neutral reforms of the German tax and transfer system designed to improve work incentives for people with low incomes: a feasible flat tax reform that provides a basic income equal to the current level of the means-tested unemployment benefit, and two alternative reforms that involve employment subsidies to stimulate participation and full-time work, respectively. We estimate labor supply reactions and welfare effects using a microsimulation model based on household data from the Socio-Economic Panel and a structural labor supply model. We find that all three reforms increase labor supply in the first decile of the income distribution. The flat tax scenario reduces overall labor supply by about 5%; the reform designed to increase participation reduces labor supply by 1%; the reform that provides incentives to work full-time has negligible effects on overall labor supply. With equal welfare weights, aggregate welfare gains are realizable under all three reforms.
9 citations
Posted Content•
TL;DR: In this paper, the authors compare alternative tax systems in an environment with distinct roles for public and private insurance, and evaluate alternative policies using a social welfare function designed to capture the taste for redistribution reflected in the current tax system.
Abstract: What structure of income taxation maximizes the social benefits of redistribution while minimizing the social harm associated with distorting the allocation of labor input? Many authors have advocated scrapping the current tax system, which redistributes primarily via marginal tax rates that rise with income, and replacing it with a flat tax system, in which marginal tax rates are constant and redistribution is achieved via non-means-tested transfers. In this paper we compare alternative tax systems in an environment with distinct roles for public and private insurance. We evaluate alternative policies using a social welfare function designed to capture the taste for redistribution reflected in the current tax system. In our preferred specification, moving to the optimal flat tax policy reduces welfare, whereas moving to the optimal fully nonlinear Mirrlees policy generates only tiny welfare gains. These findings suggest that proposals for dramatic tax reform should be viewed with caution.
9 citations