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The distribution of the tax burden and the income distribution: theory and empirical evidence

Corrado Benassi and Emanuela Randon ()
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Emanuela Randon: University of Bologna

Economia Politica: Journal of Analytical and Institutional Economics, 2021, vol. 38, issue 3, No 12, 1087-1108

Abstract: Abstract We compare the tax burden distribution across incomes and the income share distribution, based on a stochastic dominance approach. We find conditions to assess the progressivity of different sources of taxes, given knowledge of the income share elasticities, which measure the relative marginal change in the income share accruing to each class of income, associated to a marginal increase in income. We first consider a simple setting with only indirect taxes and then extend it to savings and direct taxation. The progressivity of a given set of taxes depends on the correlation between the relative incidence of the different sources of taxation and the income elasticity of household net expenditure. We use this approach to test empirically for the progressivity of the fiscal system.

Keywords: Redistributive effects; Taxation; Income distribution; Stochastic dominance; Kolmogorov–Smirnov test (search for similar items in EconPapers)
JEL-codes: H2 H22 H23 H25 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1007/s40888-020-00207-3

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Economia Politica: Journal of Analytical and Institutional Economics is currently edited by Alberto Quadrio Curzio

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Handle: RePEc:spr:epolit:v:38:y:2021:i:3:d:10.1007_s40888-020-00207-3