A large scale OLG model for the analysis of the redistributive effects of policy reforms

- We calibrate an OLG model with heterogeneous agents for France, Italy and Sweden.
- We include the main tax and benefit programmes to study income redistribution.
- Life cycle redistribution is always substantially lower than annual redistribution.
- Annual (life cycle) redistribution is the highest in Sweden (Italy).
- France redistributes less, mainly due to lower revenue from personal income tax.

The paper presents a large scale overlapping generation model with heterogeneous agents, where the household is the decision unit. We calibrate the model for three European countries - France, Italy and Sweden - which show marked differences in the design of some public programmes. We examine the properties in terms of annual and life cycle redistribution of a number of tax-benefit programmes, by studying the impact of removing from our model economies some or all of them. We find that whether one considers a life cycle or an annual horizon, and whether behavioural responses are accounted for or not, has a large impact on the results. The model may provide useful insights for policy makers on which kind of reforms are more likely to achieve specific equity objectives.