A correct assessment of public policies requires the analysis of deliberate and involuntary redistribution. Redistributive policies have an interpersonal as well as an intrapersonal dimension. To assess the latter, the entire lifetime of individuals and families has to be taken into consideration. Traditionally, redistribution is analysed with static tax-benefits microsimulation models or on stylised individuals/households. Such tools are inadequate to estimate intrapersonal redistribution.
The paper proposes a new approach, aimed at evaluating the lifetime incidence of budgetary policy on families. To do so, the definition of a “family unit” proposed by Ermish and Overton (1985) is used. By explicitly considering all tax and spending programs, the new methodology allows to estimate the overall redistribution of the public budget..
As a first application, the new methodology is applied to Italy to investigate lifetime public support to dependants. Estimation of individual/family entitlements to cash and/or in-kind benefits as well as obligations to pay taxes and social security contributions are based on the application of detailed institutional information to various sample surveys, fully taking into account the population structure by age, sex and family status.
Empirical results show that public support is not negligible, representing on average 10 percent of family expenditures. However, support is mainly geared to “old” family types - characterised by an absence of major economic problems and by low female labour market participation.
During the forthcoming months the methodology will be applied to investigate other fiscal aspects, such as the net lifetime fiscal position vis a vis the public sector of different family types.
The second part of the research explores the hypothesis that the current low demographic scenario can be characterised by “demographic free-riding”. Conclusions are such that the free-riding hypothesis is accepted. However, the scenario resembles the “positive externality” case more than that of “pure public good”.