“Decentralized Redistribution: The Impact of Tax Autonomy on Inequality”
SPEAKER: Pilar Sorribas Navarro (Universitat de Barcelona)
This paper provides novel evidence of the impact of decentralized personal taxation on income inequality. We exploit the decentralization of the Spanish Personal Income Tax that took place in 2010 to document how granting normative power to heterogeneous sub-national regions affected the redistributive effect of the tax. We first provide descriptive evidence for the stark heterogeneity of the pre-tax income distribution across regions. We show that decentralization reduced the regional Gini and increased the bottom 50 percent income share at expenses of a reduction in the top 10 percent income share. To document efficiency effects of the tax, we apply the methodology of Zidar (2019) and combine the heterogeneous distribution with national tax shocks. Results indicate that tax hikes on the rich are reflected by wage increases, while we find little effects on employment and output.
Pilar Sorribas is Associate Professor at the Department of Economics at the University of Barcelona and Research Fellow at the Institut d'Economia de Barcelona (IEB) and at the Institutions and Political Economy Research Group (IPErG). Her research interests are Political Economy and Public Finances. She holds a PhD in economics from the UAB and a MSc from York University. She has been visiting researcher at the universities of Warwick, Uppsala and Toronto. She has published her work on American Economic Journal: Applied Economics, Journal of Public Economics or the Comparative Political Studies among others.
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