How Inequality shapes Fiscal Policy: the Italian case.

The Italian heterogeneous environment created in the last decades an unequal economy re- garding mainly wealth but also income distribution. Through a quantitative analysis of public data sources the thesis aims to understand these historical dynamics and the pe- culiar landscape by both monetary and non-monetary measures from an inter-generational and intra-generational perspective. Then the study focuses on the main drivers of these inequalities, modeling long-term economic outcomes. In doing so a completely Agent-Based Model (c-ABM) is built with the use of deep learning techniques, to account for occupational decisions in a dynamic labor market with government intervention, in order to understand how inequality can shape fiscal policy. In particular, how an initial distribution of wealth, calibrated on Italian environmental parameters, could lead to a given action by the govern- ment, and what are the optimal channels through which taxation would lead to minimum inefficiency in the long run. Results with wealth maximizing government underline a shift towards progressive wealth taxation outperforming flat schedules in both aggregate wealth and Gini Index dimensions with progressivity following a bell-shaped curve along increasing inequality.