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 income 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 high-skilled mayors, while low-skilled mayors raise taxes uniformly. In the election after the reform, high-skill mayors have higher reelection odds than low-skill mayors, while there was no difference beforehand.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ZEW Discussion Papers ; No. 20-028

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): ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
• (where): Mannheim
• (when): 2020

Further information

• Handle: http://hdl.handle.net/10419/219995
• Last update: 10.03.2025, 11:46 AM CET