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The Impact of In-Work Benefits on Poverty and Household Labour Supply: A Simulation Study for Switzerland

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  • Gerfin, Michael

    ()
    (University of Bern)

  • Leu, Robert E.

    ()
    (University of Bern)

Abstract

Income support for working low income families (the “working poor”) is on top of the political agenda in Switzerland. The current social assistance system is considered inadequate to support working poor households. Labour unions propose the introduction of a general minimum wage, whereas the Swiss government promotes in-work benefits. Based on a structural labour supply model this paper provides microsimulation results of the effects of introducing different schemes of in-work benefits. It turns out that adding a minimum hours requirement to the current social assistance system is the most cost-efficient reform. Minimum wages are ineffective in fighting poverty.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 762.

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Length: 34 pages
Date of creation: Apr 2003
Date of revision:
Handle: RePEc:iza:izadps:dp762

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Keywords: microsimulation; poverty; tax credits; household labour supply;

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References

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  1. M. Keane & R. Moffitt, . "A structural model of multiple welfare program participation and labor supply," Institute for Research on Poverty Discussion Papers, University of Wisconsin Institute for Research on Poverty 1080-96, University of Wisconsin Institute for Research on Poverty.
  2. Richard Blundell & Hilary W. Hoynes, 2004. "Has 'In-Work' Benefit Reform Helped the Labor Market?," NBER Chapters, National Bureau of Economic Research, Inc, in: Seeking a Premier Economy: The Economic Effects of British Economic Reforms, 1980-2000, pages 411-460 National Bureau of Economic Research, Inc.
  3. Hoynes, Hilary Williamson, 1996. "Welfare Transfers in Two-Parent Families: Labor Supply and Welfare Participation under AFDC-UP," Econometrica, Econometric Society, Econometric Society, vol. 64(2), pages 295-332, March.
  4. Brown, Charles, 1999. "Minimum wages, employment, and the distribution of income," Handbook of Labor Economics, Elsevier, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 32, pages 2101-2163 Elsevier.
  5. Nada Eissa & Hilary Williamson Hoynes, 2000. "The Earned Income Tax Credit and the Labor Supply of Married Couples," Public Economics, EconWPA 9912001, EconWPA.
  6. Besley, Timothy & Coate, Stephen, 1995. "The Design of Income Maintenance Programmes," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 62(2), pages 187-221, April.
  7. Richard Blundell & Alan Duncan & Julian McCrae & Costas Meghir, 2000. "The labour market impact of the working families’ tax credit," Fiscal Studies, Institute for Fiscal Studies, Institute for Fiscal Studies, vol. 21(1), pages 75-103, March.
  8. Soest, A.H.O. van & Das, J.W.M., 2000. "Family Labor Supply and Proposed Tax Reforms in the Netherlands," Discussion Paper, Tilburg University, Center for Economic Research 2000-20, Tilburg University, Center for Economic Research.
  9. Besley, Timothy & Coate, Stephen, 1992. "Workfare versus Welfare Incentive Arguments for Work Requirements in Poverty-Alleviation Programs," American Economic Review, American Economic Association, American Economic Association, vol. 82(1), pages 249-61, March.
  10. V. Joseph Hotz, 2003. "The Earned Income Tax Credit," NBER Chapters, National Bureau of Economic Research, Inc, in: Means-Tested Transfer Programs in the United States, pages 141-198 National Bureau of Economic Research, Inc.
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Citations

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Cited by:
  1. Michael Gerfin & Robert E. Leu, 2007. "Evaluating the Cost-Effectiveness of In-Work Benefits: A Simulation Study for Switzerland," German Economic Review, Verein für Socialpolitik, Verein für Socialpolitik, vol. 8, pages 447-467, November.
  2. Peter Haan, . "Conditional logit versus random coefficient models: An analysis using GLLAMM," German Stata Users' Group Meetings 2004, Stata Users Group 7, Stata Users Group.
  3. Bonin, Holger & Schneider, Hilmar, 2006. "Analytical prediction of transition probabilities in the conditional logit model," Economics Letters, Elsevier, Elsevier, vol. 90(1), pages 102-107, January.
  4. Djurdjevic, Dragana, 2005. "Women's Labour Supply after Childbirth: An Empirical Analysis for Switzerland," Darmstadt Discussion Papers in Economics, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute of Economics (VWL) 37208, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute of Economics (VWL).
  5. Peter Haan, 2004. "Discrete Choice Labor Supply: Conditional Logit vs. Random Coefficient Models," Discussion Papers of DIW Berlin 394, DIW Berlin, German Institute for Economic Research.
  6. John Creedy & Guyonne Kalb, 2003. "Discrete Hours Labour Supply Modelling: Specification, Estimation and Simulation," Treasury Working Paper Series 03/20, New Zealand Treasury.
  7. Abul Naga Ramses & Kolodziejczyk Christophe & Muller Tobias, 2004. "The Redistributive Impact of Alternative Income Maintenance Schemes: A Microsimulation Study using Swiss Data," Research Papers by the Institute of Economics and Econometrics, Geneva School of Economics and Management, University of Geneva, Institut d'Economie et Econométrie, Université de Genève 2004.11, Institut d'Economie et Econométrie, Université de Genève.
  8. John Creedy & Guyonne Kalb & Rosanna Scutella, 2006. "Income distribution in discrete hours behavioural microsimulation models: An illustration," Journal of Economic Inequality, Springer, Springer, vol. 4(1), pages 57-76, April.
  9. repec:iab:iabzaf:v:38:i:4:p:475-492 is not listed on IDEAS
  10. Schneider, Hilmar & Bonin, Holger, 2005. "Wohlfahrts- und Verteilungseffekte eines allgemeinen Freibetrags bei den Sozialabgaben (Welfare and distribution effects of a general fixed allowance for social insurance contributions)," Zeitschrift für ArbeitsmarktForschung - Journal for Labour Market Research, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 38(4), pages 475-492.
  11. John Creedy & Guyonne Kalb & Rosanna Scutella, 2003. "Income Distribution in Discrete Hours Behavioural Microsimulation Models: An Illustration of the Labour Supply and Distributional Effects of Social Transfers," Melbourne Institute Working Paper Series, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne wp2003n23, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.

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