Is the Spanish economy positioned at its optimal progressivity level in personal income tax? This article quantifies the aggregate, distributional, and welfare consequences of moving toward such an optimal level. A heterogeneous households general equilibrium model featuring both life cycle and dynastic elements is calibrated to replicate some characteristics of the Spanish economy and used to evaluate potential reforms of the tax system. The findings suggest that increasing progressivity would be optimal, even though it would involve an efficiency loss. The optimal reform of the tax schedule would reduce wealth and income inequality at the cost of negative effects on capital, labor, and output. Finally, these theoretical results are evaluated using tax microdata and describe a current scenario where the income-top households typically face suboptimal effective average tax rates.

Spain is on a path toward the decarbonization of the economy. This is mainly due to structural changes in the economy, where less energy-intensive sectors are gaining more relevance, and due to a higher use of less carbon-intensive primary energy products. This decarbonization trend is in fact more accentuated than that observed in the EU28, but there is still much to be done in order to reverse the huge increases in emissions that occurred in Spain prior to the 2007 crisis. The technical energy efficiency is improving in the Spanish economy at a higher rate than in the EU28, although all these gains are offset by the losses that the country suffers due to the inefficient use of the energy equipment. There is an installed energy infrastructure (in the energy-consumer side) in the Spanish economy that is not working at its maximum rated capacity, but which has very high fixed energy costs that reduce the observed energy efficiency and puts at risk the achievement of the emissions and energy consumption targets set by the European institutions. We arrive to these findings by developing a hybrid decomposition approach called input–output logarithmic mean Divisia index (IO-LMDI) decomposition method. With this methodological approach, we can provide an allocation diagram scheme for assigning the responsibility of primary energy requirements and carbon-dioxide emissions to the end-use sectors, including both economic and non-productive sectors. In addition, we analyze more potential influencing factors than those typically examined, we proceed in a way that reconciles energy intensity and energy efficiency metrics, and we are able to distinguish between technical and observed end-use energy efficiency taking into account potential rebound effects and other factors.

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