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Shifting taxes away from labour enhances equity and fiscal efficiency

Flavia Coda Moscarola (), Ugo Colombino (), Francesco Figari and Marilena Locatelli ()

Journal of Policy Modeling, 2020, vol. 42, issue 2, 367-384

Abstract: This paper analyzes the effects of a hypothetical tax reform in Italy, which makes current tax credits more generous and refundable, shifting the tax burden from labour to property. Our methodology contains novel features of great relevance for policy analysis: first, a structural model of labour supply of both employees and self-employed; second, a labour market equilibrium model that encompasses demand side constraints; last, detailed tax system simulation under fiscal neutrality. The empirical findings provide guidance for policy makers’ actions to enhance equity and efficiency of tax system and confirm the relevance of the methodological approach.

Keywords: Equity; Efficiency; Labour market equilibrium; Tax shifting; Microsimulation (search for similar items in EconPapers)
JEL-codes: C53 D31 H31 J22 J23 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1016/j.jpolmod.2019.07.002

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Handle: RePEc:eee:jpolmo:v:42:y:2020:i:2:p:367-384