READ ME FILE to reproduce the results of "The welfare effects of tax progressivity with frictional labor markets", by Alessandra Pizzo

July 2022


The code to obtain the results of the paper has been written using the free software R and the user interface RStudio, which can be donwloaded and installed for free according to the operating system: https://www.rstudio.com/products/rstudio/download/#download

The folder data_Pizzo_RED.zip, in addition to the README.txt file, contains the following files:

- model_hetero_functions_RED.R
- model_hetero_RED.R
- model_repr_full_RED.R
- targets_graphs_RED.R

and the results are stored in the file:

- 2022_0616_wfnf.RData, which weighs 350 MB.


INSTRUCTIONS
The user has to open the .R files and load in the workspace the file 2022_0616_wfnf.RData.

The main file is model_hetero_RED.R, while model_hetero_functions_RED.R contains all the necessary functions. The file model_repr_full_RED.R is used to obtain the results of Section 5.3.2 (Figure 9).

If model_hetero_RED.R is run in the current setting, the file sets the parameters values for the full model (with SaM frictions, five skill categories) in general equilibrium.

To run the model without SaM frictions: comment line 201 and uncomment line 202.

To run the model in partial equilibrium (Section 5.2 of the paper), comment line 205 and uncomment line 206.

To run the model for only ne skill type (Section 5.3.1), comment lines 43-51 and uncomment lines 55-63.

Lines 188-196 set a parallel process to perform computations. Change line 194 to select a different number of cores (currently, 4 cores are used).

Reproducing the results by runnign the lines 210-224 is almost instantaneous, since all the simulations are already stored. To actually perform the computations, run the lines 228-229. The computation time depends on the machine and the number of cores which are devoted to the it, but it should not take more than two hours.

To reproduce the results of the paper (Tables 3-7 and all the Figures, except for Figure 9): use the file targets_graphs_RED.R
The graphs are created as pdf files and automatically saved in the working directory.