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The elasticity of personal income: evidence from survey data

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  • Gian Maria Tomat

    (Bank of Italy)

Abstract

This paper uses income survey and tax burden data for Italy, in order to estimate the elasticity of personal income to taxation. The estimated elasticity is lower with a broad definition of personal income. Given the current tax structure and the system of tax expenditures, income shifting and tax avoidance behaviour are an important determinant of the personal income tax base. The estimated regression models also show, that labour market developments have contributed to decrease inequality in the 2000–2012 sample period. The elasticity estimates are employed to simulate the effects of the “80 euro tax bonus”.

Suggested Citation

  • Gian Maria Tomat, 2018. "The elasticity of personal income: evidence from survey data," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 35(2), pages 433-462, August.
    • Handle: RePEc:spr:epolit:v:35:y:2018:i:2:d:10.1007_s40888-017-0083-1
    DOI: 10.1007/s40888-017-0083-1
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    More about this item

    Keywords

    Compensated elasticity; Income semi-elasticity; Inequality; Optimal non-linear tax rate;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies

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