Essays on Public Finances and Inequality

The guiding thread of this thesis is the analysis of Public Finances and Inequality; while taken separately these are vast topics, to study their intersection means to study some of the most pressing challenges that modern states have to address. The thesis is structured with three distinct chapters, each addressing a different topic within the above mentioned intersection across different temporal and institutional contexts. Chapter I - Dual Income Taxation and Top Income Shares. The first chapter provides a comprehensive analysis of the distributional consequences of Dual Income Taxation (DIT) systems, i.e. systems that tax progressively the labour income but apply flat rates to capital income. This study contributes in two ways to understand the shift in tax policy from comprehensive taxation to DIT in developed economies. First, it proposes a classification of income tax systems from 1980 to 2019 in advanced economies. It discusses inconsistencies in existing literature regarding which countries implemented DIT and when, especially on the very concept of what is to be labelled “dual income taxation”. Then it describes the differences among the full DIT systems, the comprehensive income tax systems, and the mixed regimes. The second contribution of this chapter consists of a comprehensive multi-country causal analysis of DIT’s effects on income concentration using state-of-the-art difference-in-differences methodologies. The study is applied in two frameworks: a “relaxed” one, which considers 15 countries with 11 of them that introduced flat taxation on capital income; then a “strict” framework, which considers 8 countries and 4 of them transitioned cleanly from comprehensive progressive taxation to DIT. Our findings provide evidence that the DIT introduction is associated with statistically significant increases in income concentration, with the top 10% income share increasing by 0.67 percentage points and the top 1% share by 0.50 percentage points following reform implementation. Although numerically modest, these increases provide economically meaningful insight that enriches the ongoing debate about optimal tax design and the redistributive issues of contemporary tax systems. Chapter II - Tax on flour in the first decades of the Kingdom of Italy (1861 - 1894): historical reconstruction and data collection. This chapter provides a historical perspective on the relationship between public finances and inequality through a detailed reconstruction of flour taxation in post-unification Italy from 1861 to 1894. This study examines two major and interacting tax institutions: the “tassa sul macinato” (grist tax), introduced in 1868 and managed by national authorities, and the “dazio di consumo” (consumption duty), a locally administered but state-regulated indirect tax levied on flour, bread, and other goods. Originally conceived as an investigation into the grist tax only, our study evolved into a broader investigation of the dual taxation system that affects this essential commodity. Using multiple sources of the time, not only we reconstruct a detailed timeline of the evolution of such taxes, but we also dive into specific features of their collection and implementation that deeply change the understanding of the consequences of those fiscal instruments. Then, after having assembled an original dataset from more than a dozen archival and published sources, we show and discuss some data regarding the effects of taxation on prices and their revenues. Of particular interest are the revenue data of tassa sul macinato: we show a deep connection with the degree of application of mechanical counters and a surprising cyclical pattern. The analysis has revealed that these taxes created significant administrative challenges and unintended distributional consequences, including distortive effects also caused by the slow diffusion of mechanical counters. The chapter contributes to understanding how taxation influenced the political economy and social geography of post-unification Italy, while providing groundwork for quantitative studies of the distributional impacts of taxation on basic necessities. Chapter III - A plan for green jobs and sustainable mobility: a scenario analysis. This study, promoted by the associations of the Alleanza Clima Lavoro, aims to simulate the economic, social, and environmental impact of a policy mix known as the “Piano per il lavoro verde e la mobilità sostenibile” which focuses on promoting the electrification of mobility in Italy and the decarbonization of the transport sector. The simulations were carried out using the Eurogreen macroeconomic model, a system dynamics-based tool specifically calibrated for the Italian context. The scenario analysis also considered additional hypotheses, such as reducing sectoral working hours and increasing exports of sustainable mobility products. The results show that, while the Plan promotes emission reduction and job growth, additional policies will be necessary to mitigate the negative social impacts of the ecological transition. Lastly, we compare our results with the forecast of Italy’s 2024 National Integrated Energy and Climate Plan highlighting a superior emissions performance, while providing a clearer source of financing for the interventions. The paper therefore highlights the importance of a systemic and integrated approach to address the challenges of transitioning towards a more sustainable and equitable future, with particular attention to socio-economic dynamics.