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A comprehensive evaluation of fiscal policy reforms requires a methodology that simultaneously considers their aggregate impact on the economy as a whole as well as their distributional implications at the individual or household level. In this paper, we provide a link between a fiscal microsimulation model and a macro-econometric model and we analyze the impact of the reform of the Italian tax-benefit system occurred in 2022. The reform is expected to have a first-round cost of about 15 billion euros due to the tax cut and the increase in child related benefits, with a reduction in inequality of around 0.5 percentage points of Gini index. Furthermore, the second-round effects, while substantially confirming the reduction in inequality, indicate an initial self-financing effect of about 7% which implies a reduced cost to the state of 1 billion euro. Our estimates support the importance of integrating micro- and macroeconomic insights for a more accurate assessment of the impact of public policies.
Alexandri et al. (Wed,) studied this question.