Welfare Analysis of Fiscal Reforms in Europe: Does the Representation of Family Decision Processes Matter? Evidence from Italy
SERIES Working Paper No. 7
Posted: 24 May 2011
Date Written: January 1, 2002
This paper adopts a “piece-meal” approach to empirically identify, on a sample of Italian households, a collective model where both nonparticipation and non-convex budget sets are allowed for. Two tax reforms, i.e. the 2002 tax changes recently introduced in Italy and a revenue neutral linear income tax are evaluated by the collective framework derived. The predictions obtained for individual labour supplies, income and welfare distribution are then compared with those of a traditional unitary model. The exercise provide an assessment of the distortion introduced in positive and normative analyses when individuals are assumed to behave as if in a unitary, rather than in a collective world. The results suggest that further efforts should be devoted to the analysis of intra-household decision models.
Keywords: Collective models, intra household allocation, tax reform
JEL Classification: D11, D12, J22
Suggested Citation: Suggested Citation