The Redistributive Effects of the Tax Wedge in Italy

Abstract. This paper presents an original data set of microdata on the tax wedge in Italy, obtained by using the microsimulation model ITAXMOD, developed at ISPE (Institute for Studies on Economic Planning). These data are used to measure the components of the tax wedge and their burden on the total cost of labour at the individual level. The results have been aggregated across income brackets, socio-economic groups and sectors of employment. These data are the necessary preliminary input for any redistributive analysis and in addition they make the available data for Italy comparable with those of other countries. Scant attention has been paid up to now to the redistributive aspects of the tax wedge, since most analyses are based on the income of the “average production worker” which is far from an ideal standard for comparison. The computation of the tax wedge for different brackets of total labour cost has been explored in two ways. The first is related to the differing weights of the components of the tax wedge on cost of labour and no particular hypothesis has been made about the incidence of these components. The results show that the burden of personal income taxation and of social security contributions is very high even for wage-earners in the lowest brackets (in 1992, the estimated tax wedge is more than 44% of total labour cost even in the second decile of the labour cost). That might discourage both labour supply and labour demand across the entire spectrum of deciles of cost of labour. The second line of research studies the incidence of personal income taxes and employees' social security contributions on gross earnings, under the maintained hypothesis that these two components of the tax wedge are shouldered by the employees.     

Employment Decisions of Married Women: Evidence and Explanations

Aggregate evidence has revealed a significant increase in women’s labour market participation (especially among married women) and a decline in male participation, both in Italy and in all the other OECD countries. This paper empirically tests the relationship between the education and employment status of husbands and wives using the Bank of Italy Survey (1995). The results of our analysis show that employed women are likely to be married to employed men with a higher level of education and higher income. The estimates of the labour supply decisions of wives show that the effect of the unemployment status of husbands is mediated by other factors associated with the family’s view of wives working outside home. The response to a husband’s unemployment depends significantly on the employment decisions of parents (mothers and mothers‐in‐law), a proxy for the couple’s attitude towards women’s work.     

Are Married Women in Turkey More Likely to Become Added or Discouraged Workers?

Abstract. The purpose of this study is to examine the labour market outcomes of married couples to find out which of the added and discouraged worker effects is dominant in urban Turkish families. Using household labour force survey and province‐level data from 1988 and 1994, we look for evidence regarding the dependency of the labour force participation decisions of wives and the employment status of their husbands. On yearly and pooled samples of married couples in their prime ages, bivariate probit estimates indicate that the two decisions are negatively correlated. However, the correlation is found to be statistically significant only in the economic crisis year of 1994. We interpret this finding to mean that the added worker effect dominates the discouraged worker effect.     

The Female Immigrant Labour Supply: The Effect of an In‐work Benefit

We explore the effect of an in‐work benefit on the labour supply of single immigrant women in Sweden. Using a simulation approach, we find that, on average, the in‐work benefit has no effect on the labour supply of these women. However, women with low incomes increase their labour supply, a response that is the strongest among non‐European and Eastern and Southern European women, and is mainly a result of increased participation in the labour market. High‐income earners slightly reduce their working hours. Thus, the results suggest that the in‐work benefit may strengthen the labour market attachment of low‐income immigrant women.     

The Optimal Income Taxation of Couples

This paper analyzes the general nonlinear optimal income tax for couples, a multidimensional screening problem. Each couple consists of a primary earner who always participates in the labor market, but makes an hours‐of‐work choice, and a secondary earner who chooses whether or not to work. If second‐earner participation is a signal of the couple being better (worse) off, we prove that optimal tax schemes display a positive tax (subsidy) on secondary earnings and that the tax (subsidy) on secondary earnings decreases with primary earnings and converges to zero asymptotically. We present calibrated microsimulations for the United Kingdom showing that decreasing tax rates on secondary earnings is quantitatively significant and consistent with actual income tax and transfer programs.     

Trends in Danish Income Distribution

Most of the available evidence on income distribution in Denmark is based on cross‐section studies for a number of specific years, which are difficult to compare owing to major changes in definitions and concepts. The data base for the present study is an existing longitudinal sample of 5 percent of the adult Danish population containing a great number of background variables for the individuals. Based on this, new results on Danish income distribution, using both individuals and married couples as the income unit, are presented. We concentrate on the impact from female participation and from unemployment. In the final parts of the paper we include some semi‐lifecycle distribution measures based on work in the Danish Economic Council and relate our results to earlier long–run estimates of inequality in Danish income distribution.     

Taxes and Quantity Constraints in a Model of Male Labour Supply in Sweden

The purpose of this study is to estimate a model of male labour supply, when agents may be subject to quantity constraints. As the data contain direct information about hours constraints, this information is used in the estimation. We also quantify the importance of such rationing for the response in the hours of work to changes in wages, income and the tax system. As it turns out, quantity constraints appear only to slightly reduce the sensitivity of the average hours of work to changes in the economic environment.     

‘Birds of a Feather Flock Together’: The Impact of Choice of Spouse on Family Labor Income Inequality

Abstract. This paper analyzes to what extent the rise in women's labor force participation has led to ‘flocking together’, i.e. whether women with high labor income tend to be married to men with high labor income, or vice versa. Based on the decomposition of the Gini coefficient and a related index for the extent of ‘flocking together’ applied to labor income data for Norway for the period 1973–97, we find a tendency for ‘flocking together’ for all married couples, and married couples with two labor incomes.     

Female Labor Supply,Human Capital,and Welfare Reform

We estimate a dynamic model of employment, human capital accumulation—including education, and savings for women in the United Kingdom, exploiting tax and benefit reforms, and use it to analyze the effects of welfare policy. We find substantial elasticities for labor supply and particularly for lone mothers. Returns to experience, which are important in determining the longer‐term effects of policy, increase with education, but experience mainly accumulates when in full‐time employment. Tax credits are welfare improving in the U.K., increase lone‐mother labor supply and marginally reduce educational attainment, but the employment effects do not extend beyond the period of eligibility. Marginal increases in tax credits improve welfare more than equally costly increases in income support or tax cuts.     

From Welfare to Work: Evaluating a Tax and Benefit Reform Targeted at Single Mothers in Sweden

Abstract. In this paper we evaluate a hypothetical tax and benefit reform to increase the working hours and to decrease welfare participation of single mothers in Sweden. We formulate and estimate simultaneously a structural static model of labor supply and welfare participation. The results suggest that labor supply among single mother households in Sweden is quite elastic, and that there is self‐selection into welfare. We also find that the proposed reform would generate welfare gains for virtually everyone in the sample, benefit low‐income households, and would at the same time generate a small revenue surplus.     

INCOME AND WEALTH CONCENTRATION IN SPAIN FROM A HISTORICAL AND FISCAL PERSPECTIVE

This paper presents series on top shares of income and wealth in Spain using personal income and wealth tax return statistics. Top income shares are highest in the 1930s, fall sharply during the first decade of the Franco dictatorship, then remain stable and low till the 1980s, and have increased since the mid 1990s. The top 0.01% income share in Spain estimated from income tax data is comparable to estimates for the United States and France over the period 1933–1971. Those findings, along with a careful analysis of all published tax statistics, suggest that income tax evasion and avoidance among top income earners in Spain was much less prevalent than previously thought. Wealth concentration has been about stable from 1982 to 2005 as surging real estate prices have benefited the middle class and compensated for a slight increase in financial wealth concentration in the 1990s. We use our wealth series and a simple model to analyze the effects of the wealth tax exemption of stocks for owners‐managers introduced in 1994. We show that the reform induced substantial shifting from the taxable to tax exempt status, hence creating efficiency costs. (JEL D31, H31, O15)     

Income Maintenance and Labor Force Participation

The paper studies the optimal tax‐subsidy schedules in an economy where the only decision of the agents is to work, or not, with an application to the case of France. Given an income guarantee provided by the welfare state, the tax schedule that maximizes government revenue provides a benchmark, the Laffer bound, above which it is inefficient to tax. In fact, under mild conditions, a feasible allocation is second best optimal if and only if the associated taxes are lower than the Laffer bound. The only restriction that efficiency puts on the shape of the tax scheme is this upper Laffer bound. The Laffer tax scheme itself can be computed from the joint distribution of the agents' productivities and work opportunity costs. Depending on the economy, it can take widely different forms, and exhibit, for instance, negative marginal tax rates. After estimating the joint distribution of productivities and work opportunity costs on French data, I compute the Laffer bound for two subpopulations, single women and married women with two children or more. Quite surprisingly, the actual incentives to work appear to be very close to the bound.     

Tax and Education Policy in a Heterogeneous‐Agent Economy: What Levels of Redistribution Maximize Growth and Efficiency?

This paper studies the effects of progressive income taxes and education finance in a dynamic heterogeneous‐agent economy. Such redistributive policies entail distortions to labor supply and savings, but also serve as partial substitutes for missing credit and insurance markets. The resulting tradeoffs for growth and efficiency are explored, both theoretically and quantitatively, in a model that yields complete analytical solutions. Progressive education finance always leads to higher income growth than taxes and transfers, but at the cost of lower insurance. Overall efficiency is assessed using a new measure that properly reflects aggregate resources and idiosyncratic risks but, unlike a standard social welfare function, does not reward equality per se. Simulations using empirical parameter estimates show that the efficiency costs and benefits of redistribution are generally of the same order of magnitude, resulting in plausible values for the optimal rates. Aggregate income and aggregate welfare provide only crude lower and upper bounds around the true efficiency tradeoff.     

The Effect of the Supply of Subsidized Day-care Facilities on Female Labour Supply

ABSTRACT: In this article the hypothesis that a higher level of subsidized day-care facilities leads to an increase in female labour supply is tested for the Netherlands on the basis of two surveys. The results show that (allowing for the women's wage rate, her non-labour income, her age, and the presence of children) labour supply is higher when subsidized day-care supply is higher. However, after including variables that reflect social norms the effect of day-care supply on female labour supply, though still positive and significant, becomes much weaker.     

Do Interactions between Finance and Labour Market Institutions Affect the Income Distribution?

This article analyses the linkages between financial development, labour market institutions and market income inequality for 18 Organisation for Economic Co‐operation and Development countries over the 1980 to 2012 period. With the help of a dynamic panel data model with an interacted term, one crucial contribution of this article is to analyse the interacted impact of labour market institutions (i.e. union density and employment protection legislation) on the one hand and financial development on the other hand on the income distribution. Our results indicate that changes in the financial/credit and labour market regulation affect the income distribution. Estimates of the marginal effects show that by increasing labour market regulation one also weakens the impact of the flexibilization in the financial/credit market on the increase in income inequality.     

Descrepancies between Supply and Demand and Adjustment Processes in the Labour Market

Changes in demand and supply in segments of the labour market will affect the labour market position of workers with an educational background in a related field of study. In one economic tradition such discrepancies between supply and demand are thought to lead to unemployment in the case of excess supply and to unfilled vacancies or skill shortages in the case of excess demand. The other neo‐classical oriented tradition expects wage adjustments to take fully account of these labour market imbalances, leading to higher wages for studies with excess demand and lower wages in case of excess supply. In practice the labour market might, on the one hand, be more flexible than suggested by the first approach, but on the other hand adjustment might be incomplete and not only wages but also other aspects of the employment relationship might be affected by a friction between supply and demand. This study examines the relationship between discrepancies between labour demand and supply on the one hand and manifestations of these tensions in the labour market experience of school‐leavers on the other hand. To investigate this relationship, a random coefficient model has been used, which allows for different adjustment processes for the various educational types, but still makes full use of all the information available in the data. The analyses provide insights about the importance of different adjustment processes and their complementarity and substitutability. We show that on average, supply surpluses lead to pressure to accept jobs at a level which is lower than the school‐leavers educational level, jobs with relatively low wages, and jobs with part‐time contracts. A direct link between supply surpluses and unemployment is only found for a few specific fields of study. Unemployment seems to occur mostly when school‐leavers do not take temporary jobs or jobs below their educational level in case of excess supply.     

Taxes and Women in the Labour Force in a Southern European Country: The Case of Portugal

On looking at the female labour supply in Europe, it is immediately noticed that there is a large variation among countries. One possible explanation for this fact is that different countries have different tax policies, leading to variations in incentive and costs. This has been investigated in papers such as that of Gustafsson (1992a,b) for countries such as Germany and Sweden. The same exercise has been performed by the present authors for a low-income, southern European country, Portugal, which has one of the highest rates of female participation (out of line with neighbouring countries). Female labour supply does not seem to be very sensitive to fiscal policies, as those policies have only a small influence on the take-home wage. This result appears to be independent of the fact that the female labour supply shows a higher elasticity to wages than that which has been reported for other countries. The present authors also show that Portuguese women contribute a much larger proportion of family earnings than do their counterparts in Sweden and Germany, and that the Portuguese fiscal system is rather neutral. Further studies with data from other countries are needed in order to shed more light on the issue of tax harmonization.     

Supply Chain Strategies and International Tax Arbitrage

What motivates the geographic footprint of the supply chains that multinational firms (MNFs) deploy? Traditional research in the operations and supply chain management literature tends to recommend locations primarily based on differentials in production costs and the ramifications of physical distance ignoring the role of taxation. MNFs that strategically position parts of their supply chains in low‐tax locations can allocate the profits across the divisions to improve post‐tax profits. For the profit allocation to be defensible to tax authorities, the divisional operations must possess real decision authority and bear meaningful risks. Generally speaking, the greater the transfer of risk and control, the larger the allowable allocation of profit. These transfers may also create inefficiencies due to misalignment of business goals and attitudes toward risk. We model these trade‐offs in the context of placing in a low‐tax region a subsidiary that oversees product distribution (as a limited risk distributor commissionnaire, limited risk distributor, or fully fledged distributor). Our analysis demonstrates that the MNF's preferences regarding the operating structures are not necessarily an obvious ordering based on the amount of risk and decision authority transferred to the division in the low‐tax jurisdiction. We derive and analyze threshold values of the performance parameters that describe the main trade‐offs involved in selecting an operating structure. We find some of the optimal decisions to exhibit interesting non‐monotone behavior. For instance, profits can increase when the tax rate in the low‐tax jurisdiction increases. Numerical analysis shows that the Limited‐Risk Distributor structure is rarely optimal and quantifies when each alternative dominates it.     

Physicians’ Labour Supply: The Wage Impact on Hours and Practice Combinations

Abstract. It is a stated aim to improve physician services in underserved sectors and areas. Increased wages is one instrument for boosting the hours provided by the personnel to the prioritized sub‐markets. This study applies an econometric framework that allows for non‐convex budget sets, non‐linear labour supply curves and imperfect markets with institutional constraints. The labour supply decision is viewed as a choice from a set of discrete alternatives (job packages) in a structural labour supply model estimated on Norwegian micro data. An out‐of‐sample prediction is also presented and evaluated by means of a natural experiment.     

基于税盾效应的供应链贸易信用融资优化决策研究

针对中小企业融资困境的现实，本文基于贸易信用融资模式，引入税盾效应，建立了由单一核心供应商和单一经销商组成的含税盾的贸易信用模型，探讨有融资需求的经销商进行订货、核心供应商定价的决定策略，探究不同计息方式的价值实现和融资模式优选。通过stackbelberg博弈、比较分析和算例验证，研究发现以订货量确定为基准，融资需求出现的时点对供应链企业计息方式的选择均有影响。税法关于利息抵扣上限、贸易信用贷款利率、订货量等均影响经销商计息方式的选择，融资额度影响其订货策略；生产成本的差额、定价策略影响供应商的计息方式。