High Inflation and Wage Rigidity: The Implicit Response of the Italian Tax-Benefit System

Stefano Boscolo () and Francesco Figari

Center for the Analysis of Public Policies (CAPP) from Universita di Modena e Reggio Emilia, Dipartimento di Economia "Marco Biagi"

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.

Keywords: inflation; indexation; fiscal drag; redistribution; EUROMOD (search for similar items in EconPapers)
JEL-codes: D31 H23 H24 (search for similar items in EconPapers)
Pages: pages 32
Date: 2023-11
New Economics Papers: this item is included in nep-age, nep-eur, nep-pbe and nep-pub
References: Add references at CitEc
Citations:

Downloads: (external link)
http://155.185.68.2/CappPaper/Capp_p187.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mod:cappmo:0187

Access Statistics for this paper

More papers in Center for the Analysis of Public Policies (CAPP) from Universita di Modena e Reggio Emilia, Dipartimento di Economia "Marco Biagi" Contact information at EDIRC.
Bibliographic data for series maintained by Sara Colombini ().