Austerity and Distributional Policy

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 8644

Classification and Topics

• Classification: Wirtschaft ; Positive Analysis of Policy Formulation and Implementation ; Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes ; State and Local Government; Intergovernmental Relations: General
• Subject: austerity ; fiscal rules ; non-linear income taxation ; difference-in-discontinuity

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Alpino, Matteo ; Asatryan, Zareh ; Blesse, Sebastian ; Wehrhöfer, Nils
• Event: Veröffentlichung
• (who): Center for Economic Studies and Ifo Institute (CESifo)
• (where): Munich
• (when): 2020

Further information

• Handle: http://hdl.handle.net/10419/229462
• Last update: 10.03.2025, 11:44 AM CET