Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/300369 
Year of Publication: 
2023
Series/Report no.: 
EUROMOD Working Paper No. EM 05/23
Publisher: 
University of Essex, Institute for Social and Economic Research (ISER), Colchester
Abstract: 
We study the redistributive effect of inflation-induced revenue and expenditure variations in the Italian tax-benefit system in a context in which pensions and social transfers are indexed to inflation and nominal wage growth struggles to keep up. By means of the EUROMOD microsimulation model, we isolate the contribution of i) fiscal drag through the personal income tax, ii) indexation rules and policy changes regarding social insurance contributions and iii) pension and social transfer indexation rules related to the overall redistributive effect of the tax-benefit system and its vertical and horizontal components. The findings suggest that benefit indexation rules contribute to a non-negligible extent to income redistribution, that fiscal drag has a small regressive effect and that the implicit redistribution favours pensioners over private-sector employees.
Subjects: 
inflation
indexation
fiscal drag
redistribution
EUROMOD
JEL: 
D31
H23
H24
Document Type: 
Working Paper

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