The Spending Effects of a Tax Rebate in Italy: A Fuzzy RKD Experiment

Abstract This paper examines the spending effects of a popular tax rebate in Italy - the so-called ‘Renzi Bonus’ (RB) - across four key expenditure categories: total expenditure, food, durables, and other goods and services. We focus on a specific normative income threshold providing a well-defined quasi-experimental setting. A key innovation of our study is the use of a novel administrative-survey linked dataset for Italy which allows for the precise identification of RB recipients, thus improving on previous studies relying solely on survey data. Furthermore, our analysis employs a fuzzy Regression Kink Discontinuity (RKD) design, which leverages the rebate allocation rule to construct a credible quasi-experimental framework. The findings indicate that, at the EUR 24, 000 income kink, the RB does not have a statistically significant effect on household semi-elasticity of consumption. However, positive, albeit limited, effects are detected on the consumption of ’other goods and services’ - the residual category remaining after netting out total expenditure for food and durables. These results are consistent across multiple model specifications and robustness checks. Overall, our study contributes to the broader literature on fiscal policy and household economic behaviour by providing robust evidence on the limited short-term spending effects of the RB.