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 analyzed properties of measures of inequality, applied to income inequalities but meaningful for practically any measure of dispersion in economics, and showed that these properties are equivalent to each other: positivity out of equality, rectifiance, quasi-convexity, and concavity.
710 citations
Additional excerpts
...We choose Kolm ( 1976) Social Welfare index, which can be defined as: ( ){ }i i exp1 ln N k W k µ µ µ − − = − ∑ (8) where 1 is an index of Efficiencyi iN µ µ= ∑ , ( ){ }i i exp1 ln Kolm Inequality Index, N k k µ µ − − = ∑ Inequality Aversion parameter,k = µi = comparable money-metric…...
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Book•
01 Jan 2013TL;DR: Anthony Atkinson as mentioned in this paper presents a comprehensive set of policies that could bring about a genuine shift in the distribution of income in developed countries, including technology, employment, social security, the sharing of capital, and taxation.
Abstract: Inequality is one of our most urgent social problems. Curbed in the decades after World War II, it has recently returned with a vengeance. We all know the scale of the problem talk about the 99% and the 1% is entrenched in public debate but there has been little discussion of what we can do but despair. According to the distinguished economist Anthony Atkinson, however, we can do much more than skeptics imagine.Atkinson has long been at the forefront of research on inequality, and brings his theoretical and practical experience to bear on its diverse problems. He presents a comprehensive set of policies that could bring about a genuine shift in the distribution of income in developed countries. The problem, Atkinson shows, is not simply that the rich are getting richer. We are also failing to tackle poverty, and the economy is rapidly changing to leave the majority of people behind. To reduce inequality, we have to go beyond placing new taxes on the wealthy to fund existing programs. We need fresh ideas. Atkinson thus recommends ambitious new policies in five areas: technology, employment, social security, the sharing of capital, and taxation. He defends these against the common arguments and excuses for inaction: that intervention will shrink the economy, that globalization makes action impossible, and that new policies cannot be afforded.More than just a program for change, Atkinson s book is a voice of hope and informed optimism about the possibilities for political action."
697 citations
Posted Content•
TL;DR: In this article, the authors investigated the optimal income transfer problem at the low end of the income distribution and derived optimal tax formulas as a function of the behavioral elasticities, the shape of income distribution, and the redistribution tastes of the government.
Abstract: This paper investigates the optimal income transfer problem at the low end of the income distribution. The government maximizes a social welfare function and faces the traditional equity-efficiency trade-off. The paper models labor supply behavioral responses along the intensive margin (hours or intensity of work on the job) and along the extensive margin (participation in the labor force). Optimal tax formulas are derived as a function of the behavioral elasticities, the shape of the income distribution and the redistribution tastes of the government. When behavioral responses are concentrated along the intensive margin, the optimal transfer program is a classical Negative Income Tax program with a substantial guaranteed income support that is taxed away at high rates. However, when behavioral responses are concentrated along the extensive margin, the optimal transfer program is an Earned Income Credit program with negative marginal tax rates at low income levels and a small guaranteed income. Numerical simulations calibrated with the actual empirical earnings distribution are presented for a range of behavioral elasticities and redistributive tastes of the government. For realistic elasticities, the optimal program provides a moderate guaranteed income, imposes low tax rates on very low annual earnings levels, and then starts phasing out benefits at substantial rates.
659 citations
"The case for NIT+FT in Europe. An e..." refers background or methods in this paper
...The tax-reform literature typically represents GNIT with 14 A recent contribution (Kroft et al. 2017) that adopts the “sufficient statistics” approach (Chetty, 2009) and generalises Saez (2002) also finds an optimal design which is closer to NIT than to IWB....
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...Saez (2002) presents a (discrete choice) model that includes extensive responses but introduce very special restrictive assumptions on intensive responses....
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...UBI and other member of the NIT class have been analysed with 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…...
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...…Optimal Taxation (TOT) approach that consists of computing optimal policies using theoretical formulas with imputed or calibrated parameters, as many authors have done, e.g. using the theoretical results of Mirrlees (1971) or the more recent ones such as Diamond (1998) and Saez (2001, 2002)....
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...This procedure is more flexible than the empirical applications of the TOT provided for example by Mirrlees (1971) or Saez (2001, 2002)....
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TL;DR: In this paper, the relationship between economics and freedom of the social thinking in 1980's America and Britain is explored. But the authors focus on the economic aspects of social thinking, not the social aspects.
Abstract: Explores the relationship between economics and freedom of the social thinking in 1980's. America and Britain.
650 citations
TL;DR: In this paper, the authors derived optimal income tax formulas using compensated and uncompensated elasticities of earnings with respect to tax rates, and implemented these formulas numerically using empirical earning distributions and a range of realistic elasticity parameters.
Abstract: This paper derives optimal income tax formulas using compensated and uncompensated elasticities of earnings with respect to tax rates. A simple formula for the high income optimal tax rate is obtained as a function of these elasticities and the thickness of the top tail of the income distribution. In the general non-linear income tax problem, this method using elasticities shows precisely how the different economic effects come into play and which are the key relevant parameters in the optimal income tax formulas of Mirrlees. The optimal non-linear tax rate formulas are expressed in terms of elasticities and the shape of the income distribution. These formulas are implemented numerically using empirical earning distributions and a range of realistic elasticity parameters.
596 citations