Francesc Oliver Rullan, Amedeo Spadaro Giardina
In this paper, we will use methodology proposed by Bourguignon and Spadaro (2000b) in order to analyze if and how social preferences on inequality have changed since the introduction of the 1999 reforms to the Spanish redistribution system. Our starting point is the observed distribution of a population�s gross and disposable incomes and the observed marginal tax rates as computed in standard tax-benefit models. We show that, using a set of simplifyng assumptions, it is possible to identify the social welfare function that would make the observed marginal tax rate schedule optimal, given certain assumptions on consumption- leisure preferences. We apply this methodology to the 1998 and 1999 Spanish tax benefit systems, using the Eurostat (ECHP) dataset on the income and socio-demographic characteristics of Spanish households. In order to explore other scenarios, we will also analyze the social preferences implicit in a basic incomeflat tax (BI-FT) system, in line with recent proposals made by various politicians and Spanish economists.
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