RICERCA ITALIANA     

Globalisation, demographic trends and the future of fiscal systems

Università Commerciale "Luigi Bocconi" - Milano

Abstract

The aim of the research project is to analyze the evolution of tax and welfare systems in an international perspective and to study the effects of globalization and of demographic changes on national tax systems. The analysis will be both theoretical and empirical.

Although these issues have been widely debated on theoretical grounds, a broad consensus on the impact of such phenomena is still missing. From an empirical point of view, it remains to be shown what the effects are of alternative reforms that allow the fiscal systems to react to the new needs imposed by the change of the structure of the economy.

The interest for the analysis of interdependencies among national fiscal policies increased along with the augmented opening of the markets of goods and inputs. It is common opinion that "fiscal competition" is one of the more relevant factors of change of modern systems. It is often stated that to attract mobile tax bases and to avoid jeopardizing the competitiveness of national products it is necessary to reduce the tax burden, to decrease the progressivity of taxation and to introduce a larger co-ordination of fiscal policies at the international level. Although the economic literature has widely evolved during the last decade, it seems unable to explain the fiscal policies of governments in highly integrated economies.

Moreover, the ongoing demographic trend has put the traditional welfare system under pressure >>>

Principal Investigator

Roberto ARTONI Università Commerciale "Luigi Bocconi" MILANO

Research Objectives

Since the 1990's the tax systems of the main regions of the world economy faced needs of restructuring and reform. The solutions implemented by national governments have been different even in presence of similar phenomena among different areas, such as the ageing of the population, the stronger economic integration, the demand for reduction of the tax burden, the evolution of the job market.
The aim of the research project is to analyze the evolution of tax and welfare systems in an international perspective and to study the effects of globalization and of demographic changes on national tax systems, both theoretically and empirically.
The interest for the analysis of interdependencies among national fiscal policies increased along with the augmented opening of the markets of goods and inputs. It is common opinion that "fiscal
competition" is one of the more relevant factors of change of modern fiscal systems. In particular, it is often stated that to attract mobile tax bases and to avoid jeopardizing the competitiveness of national products it is necessary to reduce the tax burden, to decrease the progressivity of taxation and to introduce a larger co-ordination of fiscal policies at the international level. Although the economic literature has widely evolved during the last decade, it seems unable to explain the fiscal policies of governments in highly integrated economies.
Moreover, the ongoing demographic trend has put the traditional >>>

First Results

The Lecce Unit expects to complete the theoretical analysis of the effects of tax competition on the progressivity of fiscal systems and on human capital accumulation in general equilibrium models with perfect competition. Furthermore, it expects to start the theoretical investigation of the strategic interaction among national fiscal systems in a Economic Geography framework. This part of the research will be completed in the second phase by analyzing the scope for international coordination.
The Milano-Bocconi Unit expects to complete the description of the historical development of private welfare and the actual implementation in those countries where its presence dates back a few years. This Unit also expects to begin the theoretical analysis of the implications of the shift from public to private welfare and the collection of data to be used in the microsimulations in the second phase.
The Milano-Statale Unit expects to collect a data base which will be used to perform international comparisons of the trends of public investments and of the structure of public sector budget. Moreover this Unit expects to identify models of capital accumulation and financing for a number of public services, in particular those that are capital intensive.
The Pavia Unit expects to write a report on East Asia countries to describe the main features of their fiscal systems and how they have evolved over the nineties and it will then analyse the main taxes. It then >>>

Timescale

24 months

National and international background

Intensified international competition, ageing population, de-industrialisation, concern about the high level of taxation, changing roles in labour markets and households all pose a severe re-thinking about the scope and the ways of public intervention in the economy. The discussion over problems and strategies of reform is by now a long standing one and it is focused both on the expenditure and on the revenue side of the welfare state.
On the revenue side, a large literature has analyzed the effects of factor and good market integration on fiscal systems, with particular attention to the strategic interactions among fiscal policy choices of different countries (a large survey can be found in Wilson, 1999). This line of research was originally developed following the methodological approach of the optimal taxation theory (Gordon, 1983) mainly resorting to general economic equilibrium models with perfectly competitive markets, constant or decreasing returns to scale and no uncertainty. Public intervention is justified by the presence of public goods and by the necessity of income redistribution. The analyses conducted in this particular theoretical context agree on a series of conclusions: goods and factors market integration forces countries to reduce the public budget and to transfer the fiscal burden from mobile to less mobile factors; factors mobility reduces the opportunities of income redistribution; the process of economic integration requires fiscal policies >>>