Public Finance Consolidation and Fairness Across Living Generations: The Case of Italy

21 Pages Posted: 21 Mar 2012

See all articles by Paolo Pertile

Paolo Pertile

University of Verona - Department of Economics

Veronica Polin

University of Verona

Pietro Rizza

Bank of Italy

Marzia Romanelli

Bank of Italy

Date Written: January 31, 2012

Abstract

The paper is a contribution to the study of the redistributive impact of public sector intervention across living generations. We aim to work on a comprehensive approach, so that reforms involving several taxation and spending programmes, possibly implemented over several years, may be assessed. By adapting methods from the generational accounting literature, we investigate the impact on fairness between living generations of fiscal policies undertaken in Italy between 1990 and 2008. Large intergenerational differences exist in net tax rates calculated over the residual lifetime horizon, which tend to be substantially higher for young generations. Pension reforms introduced in the '90s play a major role in explaining these differences. We conclude that a significant contribution to the sustainability of these reforms might have come at the price of an unequal distribution of sacrifices across living generations. Awareness of these differences could help in designing additional consolidation efforts in the perspective of achieving intergenerational fairness in Italy.

Keywords: intergenerational equity, generational accounting, fiscal policy

JEL Classification: H30, H50, H60

Suggested Citation

Pertile, Paolo and Polin, Veronica and Rizza, Pietro and Romanelli, Marzia, Public Finance Consolidation and Fairness Across Living Generations: The Case of Italy (January 31, 2012). Working Paper Series, Department of Economics, University of Verona 4/2012, Available at SSRN: https://ssrn.com/abstract=2025916 or http://dx.doi.org/10.2139/ssrn.2025916

Paolo Pertile (Contact Author)

University of Verona - Department of Economics ( email )

Via dell'Artigliere, 8
Verona, 37129
Italy

Veronica Polin

University of Verona ( email )

Via Cantarane 24
37129 Verona
Italy

Pietro Rizza

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Marzia Romanelli

Bank of Italy ( email )

Via Nazionale 91
00184 Roma
Italy

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