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.