# Progressivity in Consumption or Income Taxes? General Equilibrium Analysis and Distributional Effects of a Progressivity Rebalancing in a Heterogeneous-Agent Framework
**Date de l'événement :** 02/07/2025
* Publié le 02/07/2025

### Image(s)
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## Auteur(s)
Andrea Maestri

## Direction
Axelle Ferriere

## Description
**Ce mémoire est issu de la sélection des meilleurs mémoires du master d’économie de l'année 2024-2025 :  
  
Abstract**  
  
Income and consumption taxes are major sources of fiscal revenue for all advanced economies. While progressivity is a well-established principle in the design of income taxes, consumption taxes are typically implemented through a single flat rate or a limited set of differentiated rates based on the nature of goods and services. These differentiated schedules introduce implicit progressivity in many consumption tax systems by varying tax burdens across households with different consumption profiles. Using a tractable heterogeneous-agent model with incomplete markets, this study investigates the macroeconomic and distributional effects of allowing both labor income and consumption taxes to exhibit progressivity in the same fiscal regime. To do so, I simulate a series of revenue-neutral fiscal regimes in which progressivity is shifted between the two tax instruments, in a novel exercise which I refer to as progressivity rebalancing.  
  
The analysis reveals three key findings. First, the redistributive capacity of a tax depends critically on the characteristics of its base: labor income taxation, acting on a more unequal distribution, has stronger redistributive potential but higher distortionary effects. Second, welfare effects operate through both redistribution and insurance channels, with lower-income households particularly sensitive to the erosion of consumption smoothing when labor tax progressivity is reduced. Third, progressive consumption taxation emerges as a flexible second-best tool that can offset equity losses from flatter labor taxation, preserving redistribution and insurance while reducing efficiency losses. These findings highlight the relevance of progressivity in consumption tax design as a core component of modern fiscal policy, especially in contexts where labor tax progressivity is constrained.  
  
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**Accéder au mémoire en ligne :** [https://www.sciencespo.fr/ecole-recherche/sites/sciencespo.fr.ecole-recherche/files/MAESTRI-Andrea.pdf](https://www.sciencespo.fr/ecole-recherche/sites/sciencespo.fr.ecole-recherche/files/MAESTRI-Andrea.pdf)

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