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A new universal child allowance in Italy: equity and efficiency concerns

Author

Listed:
  • Nicola Curci

    (Bank of Italy)

  • Marco Savegnago

    (Bank of Italy)

Abstract

The paper discusses a possible scheme for a new universal child allowance (assegno unico e universale per i figli, AUU) and evaluates its effects on income distribution (equity) and on financial disincentives to work (efficiency). The analysis, carried out using the Banca d'Italia tax-benefit microsimulation model BIMic, takes into account the principles defined in the enabling law recently approved by the Parliament and the budgetary resources set aside for this measure. The scheme envisaged in the paper differs from the proposals discussed so far in public debate about the AUU due to a significant innovation, namely the introduction of an in-work benefit component. The simulated reform would not only reduce the inequality of disposable income with respect to the current legislation scenario, but also – due to the above mentioned in-work benefit – would lessen the financial disincentives to labor market participation for potential female workers. The latter result is particularly strong for low-income households.

Suggested Citation

  • Nicola Curci & Marco Savegnago, 2021. "A new universal child allowance in Italy: equity and efficiency concerns," Questioni di Economia e Finanza (Occasional Papers) 636, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:opques:qef_636_21
    as

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    File URL: https://www.bancaditalia.it/pubblicazioni/qef/2021-0636/QEF_636_21.pdf
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    References listed on IDEAS

    as
    1. Nicola Curci & Marco Savegnago & Marika Cioffi, 2017. "BIMic: the Bank of Italy microsimulation model for the Italian tax and benefit system," Questioni di Economia e Finanza (Occasional Papers) 394, Bank of Italy, Economic Research and International Relations Area.
    2. Nicola Curci & Marco Savegnago, 2019. "Shifting taxes from labour to consumption: the efficiency-equity trade-off," Temi di discussione (Economic working papers) 1244, Bank of Italy, Economic Research and International Relations Area.
    3. Nada Eissa & Jeffrey B. Liebman, 1996. "Labor Supply Response to the Earned Income Tax Credit," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 111(2), pages 605-637.
    4. Nicola Curci & Giuseppe Grasso & Pasquale Recchia & Marco Savegnago, 2020. "Anti-poverty measures in Italy: a microsimulation analysis," Temi di discussione (Economic working papers) 1298, Bank of Italy, Economic Research and International Relations Area.
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    More about this item

    Keywords

    family policies; redistribution; equity; efficiency; microsimulation;
    All these keywords.

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution

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