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%T Combining Microsimulation and Numerical Maximization to Identify Optimal Tax-Transfer Rules %A Colombino, U. %A Islam, N. %J International Journal of Microsimulation %N 2 %P 4-43 %V 15 %D 2022 %K optimal tax-transfer systems; behavioural microsimulation; EU-SILC 2015 %@ 1747-5864 %~ FDB %> https://nbn-resolving.org/urn:nbn:de:0168-ssoar-92691-4 %X In this paper we propose a computational approach to empirical optimal taxation. We develop and estimate a microeconometric model that is run to simulate household labour supply decisions and the implied economic, fiscal and welfare effects. The microsimulation is embedded into a numerical optimization routine that identifies the tax-transfer rule that maximizes a social welfare function. We consider the class of tax-transfer rules where net available income is computed as a 4th degree polynomial transformation of taxable income plus a transfer. We present the results for six European countries: Germany, France, Italy, Luxembourg, Spain and the United Kingdom. For most values of the inequality aversion parameter k that characterizes the social welfare function, the optimized rules provide a higher social welfare than the current rule, with the exception of Luxembourg. The optimized tax-transfer rules are close to a Flat Tax plus a Universal Basic Income (or equivalently a Negative Income Tax). %C MISC %G en %9 Zeitschriftenartikel %W GESIS - http://www.gesis.org %~ SSOAR - http://www.ssoar.info