ANALYSING TAX BENEFIT REFORMS WITH NONPARAMETRIC METHODS

Analysing tax-benefit reforms with nonparametric methods Carlo V. Fiorio∗† Static tax-benefit microsimulation models (MSM) are widely used and reputed tools for public policy analysis but a more than careful use of them is compelling. This paper focuses on the analysis of MSM out-put, suggesting to use nonparametric methods as a useful, informative and relatively straightforward complement to detect effects not always captured by measures often used to present MSM results. Nonparametric methods are here used for analysing the output of a MSM applied to the 1998 Italian personal income tax reform, whose main change regarded the tax schedule: the first tax rate was increased from 10 % to 18.5 % and the top one was reduced by 4.5%. Nonparamet-ric methods highlight that the effects of this reform was very different on different types of households, with low-income pensioner households among the main losers. Results are checked for robustness by standard statistical methods and compared with empirical results obtainable us-ing quintile histograms