Austerity and Distributional Policy

Matteo Alpino, Zareh Asatryan, Sebastian Blesse and Nils Wehrhöfer

No 8644, CESifo Working Paper Series from CESifo

Abstract: What are the effects of austerity on distributional policy? We exploit the autonomy of Italian municipalities in setting non-linear income taxes and the exogenous introduction of a fiscal rule to show that austerity increases tax progressivity. Consistent with this evidence, we find that in a panel of countries austerity correlates with higher marginal tax rates on top, but not on average earners. The increase in progressivity in Italy is driven by mayors having college-degree or working in high-skill occupations, while less-educated or lower-skilled mayors raise taxes uniformly. In the first post-reform election, mayors of former type have higher reelection odds.

Keywords: austerity; fiscal rules; non-linear income taxation; difference-in-discontinuity (search for similar items in EconPapers)
JEL-codes: D78 H24 H70 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-eur and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Related works:
Journal Article: Austerity and distributional policy (2022)
Working Paper: Austerity and distributional policy (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_8644

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