A Multi-Agent Model of Tax Evasion with Public Expenditure

We develop a model where heterogeneous agents maximize their individual utility based on (after tax) income and on the level of public expenditure (as in Cowell, Gordon, 1988). Agents are different in risk aversion and in the relative preference for public expenditure with respect to personal income. In each period, an agent can optimally conceal some income based on conjectures on the perceived probability of being subject to audits, the perceived level of public expenditure and the perceived amount of tax paid by other individuals. As far as the agent-based model is concerned, we assume that the Government sets the tax rate and the penalties, uses all the revenue to finance public expenditure (with no inefficiency) and fights evasion by controlling a (random) fraction of agents. We show that, through computational experiments based on micro-simulations, stable configurations of tax rates and public expenditure endogenously form in this case as well. In such equilibrium-like situations we find: • a positive relationship between the tax rate and evasion still arises. • tax compliance mainly depends on the distribution of personal features like risk-aversion and the degree of preference for public expenditure. • an endogenous level of tax evasion that is almost not affected by reasonable rates of control. A proper choice of the tax rate results instead in voluntary partial compliance. • the enforcement of higher compliance rates requires unrealistic and costly large-scale audits.Tax evasion, public expenditure, agent-based models

Waiting Times and Cost Sharing for a Public Health Care Service with a Private Alternative: A Multi-agent Approach

Cost sharing represent a well-established tool for the control of health care demand in many Oecd countries, even though it is used with caution, and in combination with other instruments, in order to avoid potential negative impacts on access to essential health care services. Waiting lists and waiting times represent an alternative (and implicit) way to control demand in public health care systems, even though rationing by waiting may be an inferior solution to cost-sharing in terms of welfare. This paper focuses on the use of waiting times, cost-sharing, and other tools (in particular, priority and appropriateness criteria) in order to control demand for a public outpatient health service in presence of a fully paid out-of-pocket private alternative. We develop an agent-based model where heterogeneous agents maximise their individual utility based on income and health status. On this basis, we develop some computational experiments based on micro-simulations that offer some useful insights for health care policy. In particular, we show that: i) the presence of a private alternative to public treatment can improve social welfare and health equity in a NHS, when public supply is constrained by a fixed budget and longer waiting times than the private one; ii) using prioritisation of waiting lists without any copayment to control the demand for public treatment may produce high performances in terms of social welfare, health equality and policy efficiency; iii) applying a moderate copayment rate as a tool to control public demand could determine the same policy efficiency of using only priority lists, if the copayment revenues are used to fund the public provision.health care demand; private provision; waiting times; cost-sharing; equity, agent-based model

Measuring Hospital Efficiency through Data Envelopment Analysis when Policy-makers’ Preferences Matter. An Application to a sample of Italian NHS hospitals

In this paper we show how both the choice of specific constraints on input and output weights (in accordance with health care policy-makers’ preferences) and the consideration of exogenous variables outside the control of hospital management (and linked to past policy-makers’ decisions) can affect the measurement of hospital technical efficiency using the Data Envelopment Analysis (DEA). Considering these issues, the DEA method is applied to measure the efficiency of 85 (public and private) hospitals in Veneto, a Northern region of Italy. The empirical analysis allows us to verify the role of weight restrictions and of demand in measuring the efficiency of hospitals operating within a National Health Service (NHS). We find that the imposition of a lower bound on the virtual weight of acute care discharges weighted by case-mix (in order to consider policy-maker objectives) reduces average hospital efficiency. Moreover, we show that, in many cases, low efficiency scores are attributable to external factors, which are not fully controlled by the hospital management; especially for public hospitals low total efficiency scores can be mainly explained by past policy-makers’ decisions on the size of the hospitals or their role within the regional health care service. Finally, non-profit private hospitals exhibit a higher total inefficiency while both non-profit and for-profit hospitals are characterised by higher levels of scale inefficiency than public ones.Hospital performance, Technical efficiency, Data envelopment analysis, NationalHealth Service

Potential efficiency gains and expenditure savings in the Italian Regional Healthcare Systems

The paper aims to analyse the extent to which the adoption of best practice policies could improve the efficiency of Italian Regional Healthcare Systems (RHSs) and reduce public healthcare expenditures. By means of a stochastic frontier model we estimate the RHSs’ technical inefficiency and its determinants using a panel data of 16 regions over the period 2010-2016. We use the Essential Levels of Care (LEA) scores computed by the Ministry of Health as a proxy for the RHSs’ output and public healthcare expenditure as the main input. The level of inefficiency is a function of a set of variables summarising the organisational arrangements implemented by RHS policymakers. The results allow us to identify the best-practice policy, defined as the set of observable organisational arrangements that maximises aggregate efficiency. Adoption of the best-practice policy by all RHSs leads to potential efficiency gains of 1.5 per cent on average (from 93.4 per cent to 94.9 per cent) and to potential healthcare expenditure savings of 1.8 billion euro in 2016 (1.77 per cent of current expenditures)

Tax evasion, behavioral microsimulation models and flat-rate tax reforms. Analysis for Italy

It is sometimes argued that a flat-rate tax reform can reduce tax noncompliance. The argument is, however, inconsistent with the so-called Yitzhaki’s puzzle of the classical expected utility (EU) model. The latter predicts an increase, rather than a reduction, in tax evasion following a cut in the tax rates resulting from a flat-rate reform. We study the impact of a flat-rate tax in a microsimulation tax-benefit model of Italy which allows us to analyse various hypotheses of tax evasion behavior. In addition to the EU model, we analyse expected utility with rank dependent probabilities (EURDP) and the model of reference dependent (RD) preference, the most favourable to overturn Yitzhaki’s puzzle. Our simulations show that a flat-rate tax would barely reduce overall evasion in Italy in all models considered. Redistributive effects are in all cases large

Regional Institutional Quality and Territorial Equity in LTC Provision

We show how regional governments affect the appropriate – in terms of territorial equity - assignment of a national LTC benefit. We analyse a three -layers setting, where eligibility criteria are defined by the central government (which bears the fiscal cost of transfers) but the assignment decision is taken by regional medical commissions, while applications are activated by individual potent ial beneficiaries. Combining administrative and survey data, and accounting for regional variation in eligibility prevalence, we document large territorial disparities in need - adjusted benefit assignment. We investigate the determinants of such disparities both in terms of individuals’ differential propensity to claim, and of regional discretionary behaviour, as shaped by the underlying quality of regional institutions. Regional discretion appears to play a major role, with local institutional quality accou nting for about one fifth of explained variation in need- adjusted benefit coverage. Lower regional institutional quality results in more opportunistic benefit adjudication decisions, although the relationship is attenuated in highly deprived areas

A Procedure for the Ex-Ante Assessment of Compulsory Municipal Amalgamation Programs

The aim of the paper is to develop a procedure that allows policy makers to make an ex-ante assessment of a general compulsory amalgamation policy, providing quantitative indications about the possible financial effects. The amalgamation of small municipalities is a widespread practice all over the world. This policy is based on the assumption that local public service provision is characterized by economies of scale and economies of scope. However, population size is not the only determinant of economies of scale, which depend on many other factors. For these reasons, the expected effects of any amalgamation program are uncertain, and ex-post empirical analyses are unable to offer unambiguous indications to policy makers since all programs differ. After a brief discussion of the relevant issues concerning amalgamation, we present the procedure used to simulate the economics and administrative effects of a general compulsory amalgamation policy. The procedure is tested with reference to the municipalities of Veneto, a region of Italy and we provide the results of a number of simulations under alternative amalgamation policies. The main result is that amalgamation policies based only on the a priori rule that small municipalities should merge may be very inefficient because the expenditure reduction following an amalgamation policy may depend to a considerable extent on other territorial and socioeconomic characteristics of the municipalities involved

Accounting for tax evasion profiles and tax expenditures in microsimulation modelling. The BETAMOD model for personal income taxes in Italy

The paper presents the main characteristics of BETAMOD, a static microsimulation model that reproduces the Italian personal income tax (IRPEF), as well as local income taxes, namely the regional and municipal surtaxes, building on a detailed reconstruction of tax legislation. With respect to the vast majority of existing tax microsimulation models, the peculiarities of BETAMOD concern two aspects: the inclusion of a detailed set of tax expenditures, and the estimation of individual-specific tax evasion rates, which account for the total individual income level, its composition in terms of income sources, and the geographical area of residence

Larger is Better: The Scale Effects of the Italian Local Healthcare Authorities Amalgamation Program

Consolidation is often considered as a means to lower service delivery costs and enhance accountability. This paper uses a prospective evaluation design to derive estimates of the potential cost savings that may arise from Local Healthcare Authorities (LHAs) amalgamation process, which is concerning the Itali an National Health System. We focus specifically on cost savings due to scale economies with reference to a particular subset of the production costs of the LHAs, i.e. the administrative costs together with the purchasing costs of both goods as well as non-healthcare related services. Our results demonstrate the existence of economies of scale linked to the size of the LHA population. Hence, the decision to reduce the number of LHAs may result in larger local health authorities that are more cost efficient, especially when the consolidation process concerns merging a large number of LHA

Tax Evasion Indices and Profiles

The aim of this article is to adapt definitions and tools currently used in the economic literature on poverty to individual data on tax evasion. The article presents composite indices and profiles of tax evasion based on the three I’s of tax evasion: incidence, intensity, and inequality, following the approach of Shorrocks’s study and Jenkins and Lambert’s study that proposed the three I’s of poverty. In the field of tax evasion, one stream of literature produces a potentially large amount of individual microdata using tax benefit and agent-based models: the article enriches the analysis offered by these models with indices that take into account the entire distribution of taxpayer evasion rates. Particularly, the article presents a new composite index of tax evasion that incorporates a concentration index of individual tax evasion rates. A final section shows a sensitivity analysis of tax evasion indices and profiles through numerical simulations