The objective of this paper is to estimate the impact of the Portuguese Minimum Guaranteed Income Program (RMIG). We estimate its impact on the distribution of household incomes and poverty as well as the size of government expenditures necessary to finance the program. The baseline adopted is constructed under the assumption of no behavioural responses to the transfer mechanism and of total participation of all eligible households. The simulation shows that 4,8% of domestic households and 5,7% of the population are eligible to receive the RMIG. The Program has a small but positive impact in reducing inequality. However, taking labour supply effects into account results in a smaller gain in inequality reduction. Similarly, we have a small but positive impact on the poverty rate for individuals. This gain, however, is almost cancelled when labour supply reactions are taken into account. However the most important consequences of the RMIG are sharp gains in the measures of poverty sevefity and intensity. In these dimensions, taking into account the labour supply incentives of the RMIG does not reduce substantially the positive impacts of the Program.
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Paper provided by Department of Economics at the School of Economics and Management (ISEG), Technical University of Lisbon. in its series Working Papers with number
1999/03.
Length: Date of creation: 1999 Date of revision: Handle: RePEc:ise:isegwp:wp31999
Contact details of provider: Postal: Department of Economics, School of Economics and Management (ISEG), Technical University of Lisbon, Rua do Quelhas 6, 1200-781 LISBON, PORTUGAL Web page: http://www.iseg.utl.pt/departamentos/economia/
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Find related papers by JEL classification: D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement I38 - Health, Education, and Welfare - - Welfare and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
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