Taxation, income distribution and individual decisions

Taxation, income distribution and individual decisions

20 hours


The course introduces students to the evaluation of tax-benefit reforms on income distribution and individual decisions (mainly related to labour supply) by using microeconometric models.

The first part of the course will familiarize the students with the microsimulation models commonly used to ex-ante evaluate tax-benefit policies and the approaches to analyze income distribution and re-distribution.

The second part of the course will review the theory of labour supply, based on the assumption that individuals maximize their utility under the budget constraints given by the tax-benefit system, family characteristics, and labour market conditions. This approach provides a valuable framework for thinking about labour supply issues, in particular the effects of government social welfare policies on work incentives.

The third part focuses on applied estimation of labour supply decisions based on the random utility models (i.e. structural microeconometric models) focusing on limitations and advantages of such modelling approaches.




Part One

  • Blundell, R., 2012, Tax policy reform: the role of empirical evidence, Journal of the European Economic Association 10(1), 43-77.
  • Blundell, R., and M. Costa-Dias, 2009, Alternative approaches to evaluation in empirical Microeconomics, Journal of Human Resources 44, 565–640.
  • Bourguignon, F. and A. Spadaro, 2006, Microsimulation as a tool for evaluating redistribution policies. Journal of Economic Inequality 4(1): 77–106.
  • Figari, F., A. Paulus and H. Sutherland, 2015, Microsimulation and Policy Analysis in A.B. Atkinson and F. Bourguignon (eds.), Handbook of Income Distribution, Vol. 2. Elsevier-North Holland.
  • King, M. A., 1983, Welfare Analysis of Tax Reforms Using Household Data, Journal of Public Economics, 21, 183-214.
  • Lambert, P., 2001, The Distribution and Redistribution of Income, Third Edition, Manchester University Press, Manchester.

Part Two

  • Cahuc, P., and A. Zylberberg, 2004, Labor Economics, MIT Press. (Cap. 1 and 4).
  • Keane, M., 2011, Labor Supply and Taxes: A Survey. Journal of Economic Literature 49(4), 961-1075.
  • Meghir, C. and D. Phillips, 2010, Labour supply and taxes in J. Mirrlees (Chair) Dimensions of tax design. The Mirrlees Review. Oxford: Oxford University Press.

Part Three

  • Aaberge, R., and U. Colombino, 2012, Accounting for family background when designing optimal income taxes: a microeconometric simulation analysis, Journal of Population Economics 25(2), 741-761.
  • Aaberge, R., and U. Colombino, 2013, Using a Microeconometric Model of Household Labour Supply to Design Optimal Income Taxes, Scandinavian Journal of Economics, 115(2), 449-476.
  • Aaberge, R. and U. Colombino (2014), Labour Supply Models, in O’Donogue C. (Ed.) Handbook of Microsimulation Modelling, Emerald.
  • Aaberge, R., Colombino, U. and S. Strøm, 1999, Labour supply in Italy: An empirical analysis of joint houshold decisions, with taxes and quantity constraints, Journal of Applied Econometrics 14(4): 403–422.
  • Aaberge, R., Colombino, U. and T. Wennemo, 2009, Evaluating alternative representations of the choice sets in models of labor supply, Journal of Economic Surveys 23(3): 586–612.
  • Aaberge, R., Dagsvik, J. K. and S. Strøm, 1995, Labor supply responses and welfare effects of tax reforms, The Scandinavian Journal of Economics 97(4): 635–659.
  • Bargain O., Orsini K. and A. Peichl, 2014, Comparing Labor Supply Elasticities in Europe and the US: New Results, Journal of Human Resources, 49(3), 723-838.
  • Blundell R. and T. Macurdy, 1999, Labor supply: a review of alternative approaches, in O. Ashenfelter and D. Card, eds., Handbook of Labor Economics, Volume 3A.
  • Coda Moscarola, F., Colombino U., Figari F. and M. Locatelli, 2014, Shifting taxes from labour to property. A simulation under labour market equilibrium, EUROMOD Working Paper 20/14.
  • Colombino, U. (2013), A new equilibrium simulation procedure with discrete choice models, International Journal of Microsimulation, 6(3), 25-49.
  • Creedy, J., and A. Duncan, 2002, Behavioural microsimulation with labour supply responses. Journal of Economic Surveys 16(1): 1–39.
  • Creedy, J., and G. Kalb, 2005, Discrete hours labour supply modelling: specification, estimation and simulation. Journal of Economic Surveys, 19: 697–738.
  • Creedy, J., and G. Kalb, 2006, Labour supply and microsimulation: the evaluation of tax policy reforms. Cheltenham: Edward Elgar.
  • Dagsvik, J., and S. Strøm, 2006, Sectoral Labour Supply, Choice Restrictions and Functional Form, Journal of Applied Econometrics, 21(6), 803–826.
  • Dagsvik, J., Locatelli M. and S. Strøm, 2009, Tax Reform, Sector-specific Labor Supply and  Welfare Effects, Scandinavian Journal of Economics, 111(2), 299–321.
  • Figari, F. 2015,From housewives to independent earners: How the tax system can help women to work in a context of strong familialism, Journal of Social Policy, 44(1): 63-82.
  • Hausman J., 1985, Taxes and Labor Supply, in A. Auerbach and M. Feldstein, eds, Handbook of Public Finance, Vol I, North Holland, sections 1-3.
  • Peichl, A., and S. Siegloch, 2012, Accounting for labor demand effects in structural labor supply models, Labour Economics, 19(1), 129–138.
  • Train, K. E., 2003, Discrete choice methods with simulation. Cambridge: Cambridge University Press.
  • Van Soest, A., 1995, Structural models of family labour supply. A discrete choice approach. The Journal of Human Resources 30: 63–88.