Jorge Onrubia

A projection model of the contributory pension expenditure of the spanish social security system: 2004-2050*

The need for long-term fiscal projections is self evident. Of these projections, pension expenditure is one of the most important since firstly it represents a large share of total expenditure, and secondly because of the positive correlation between this variable and demographic ageing. In this paper, we develop a model to project contributory pension expenditures in the Spanish Social Security System disaggregating the results by pension category, social security regime and sex. The most salient of the results obtained is the expected steady growth of total expenditure in contributory pensions. This would lie around 15% of GDP around 2045 compared to its initial level of barely 8% even though the baseline scenario incorporates a substantial recovery of employment and female participation rates. By pension categories, retirement pensions are those that determine the tendency of total expenditure evolution. Interesting conclusions can also be extracted from the analysis by sex. For instance, even accounting for an increase in female retirement pensions due to their higher participation, the corresponding increase in widow male pensions implies a higher total increase of the total number of contributory pensions accruing to men.

Do Budget Institutions Matter?: Fiscal Consolidation in the New EU Member States

This paper studies the influence that the recently reformed budgetary institutions in the new EU member states may have had on their public finances. We test if their newly formed institutions have already started to shape their fiscal outcomes, as EU-15 institutions did in the past. To answer this question, this paper develops new institutional indices and performs an empirical analysis on the sample of new EU member states—those that joined in 2004 and 2007—for the period 1993-2004. The results confirm that budgetary institutions have a similar influence in the new member states as they had in the EU-15. The role of a strong finance minister is even more important than previous studies suggest.

Personal Income Tax Decentralization, Inequality, and Social Welfare

This article elaborates and evaluates a model for the decentralization of a personal income tax that is consistent with the optimal redistribution model. In this study’s model, the regions have individualistic, symmetrical, additively separable, and inequality-averse social welfare functions. Each region applies to its constituents a progressive personal income tax, which measures individuals’ ability to pay with sole regard to their income. The central government has a social welfare function, and its tax-raising power is limited to the establishment of a surcharge (or deduction) proportional to the income of individuals net of the respective regional taxes. This article presents the conditions that permit this model of fiscal decentralization to be recommended as a result of the reduction of inequality and the increase in welfare in each region and in the country as a whole. The theoretical results are applied to the Spanish income tax by the performance of various microsimulation exercises.

Evaluating social welfare and redistributive effects of Spanish personal income tax reform

Spain has recently concluded a process of wide-ranging reform of its personal income tax (IRPF), in force since 1992. The new IRPF is applicable from 1999 onward. The aim of this article is to analyse the implications of this tax reform for the distribution of personal income, and additionally to provide a comparative evaluation in terms of social welfare of both taxes. Empirical analysis is performed by a simulation exercise, employing the microdata contained in the Institute of Fiscal Studies’ IRPF Panel of Taxpayers. The analysis shows that the new IRPF induces a redistributive effect slightly lower than the old IRPF. The greater redistributive potential of the progressive structure of the new tax proves to be insufficient to compensate for the contrary effect caused by reduction in the level of tax liability. However, this new tax unambigously permits, in an inequality-adverse society, a higher level of social welfare than that attained by the old tax.

Simplification and Decentralization of the Income Tax

This article presents a new type of welfare-improving tax reform model aimed at simultaneously achieving simplification and decentralization of the personal income tax. This model is based on the results of Pfähler and Dardanoni and Lambert and comprises two elements. The first one is the transformation of the income tax into an equal-yield flat tax. The second one is a reduction of the central taxation in proportion to posttax income in order to vacate a space that may be utilized by subcentral jurisdictions through a surcharge applied on the central tax liability. The theoretical proposal is illustrated with a microsimulation exercise on the Spanish personal income tax.

An enlarged EMU? The procedural sources of fiscal policy in the new Member States

Ten new countries joined the EU in 2004, and some of them will soon also join the euro. Since their incorporation to the single currency is subject to their fulfilment of the Maastricht criteria that current members already fulfilled in 1998, this paper describes and compares these fiscal adjustments. Because fiscal consolidations vary in their timing, their duration and their composition, the article explores these dimensions and presents a model that enables us to explain such variation. Some empirical evidence pointing to the relationship between budgetary procedures and the level of fiscal discipline is shown.