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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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  • Michael Gerfin
  • Robert E. Leu

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 Universitaet Bern, Departement Volkswirtschaft in its series Diskussionsschriften with number dp0304.

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Date of creation: Apr 2003
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Handle: RePEc:ube:dpvwib:dp0304

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Keywords: Tax Credits; Household Labour Supply; Microsimulation; Poverty;

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References

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  1. Hilary Hoynes & Richard Blundell, 2001. "Has "In-Work" Benefit Reform Helped the Labour Market?," NBER Working Papers 8546, National Bureau of Economic Research, Inc.
  2. N. Eissa & H. W. Hoynes, . "The Earned Income Tax Credit and the Labor Supply of Married Couples," Institute for Research on Poverty Discussion Papers 1194-99, University of Wisconsin Institute for Research on Poverty.
  3. 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, vol. 21(1), pages 75-103, March.
  4. Besley, Timothy & Coate, Stephen, 1992. "Workfare versus Welfare Incentive Arguments for Work Requirements in Poverty-Alleviation Programs," American Economic Review, American Economic Association, vol. 82(1), pages 249-61, March.
  5. Besley, T. & Coate, S., 1991. "The Design Of Income Maintenance Programs," Papers 74, Princeton, Woodrow Wilson School - John M. Olin Program.
  6. Soest, A.H.O. van & Das, J.W.M., 2000. "Family labor supply and proposed tax reforms in the Netherlands," Open Access publications from Tilburg University urn:nbn:nl:ui:12-121735, Tilburg University.
  7. Keane, Michael & Moffitt, Robert, 1998. "A Structural Model of Multiple Welfare Program Participation and Labor Supply," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(3), pages 553-89, August.
  8. Hoynes, Hilary Williamson, 1996. "Welfare Transfers in Two-Parent Families: Labor Supply and Welfare Participation under AFDC-UP," Econometrica, Econometric Society, vol. 64(2), pages 295-332, March.
  9. V. Joseph Hotz & John Karl Scholz, 2001. "The Earned Income Tax Credit," NBER Working Papers 8078, National Bureau of Economic Research, Inc.
  10. Brown, Charles, 1999. "Minimum wages, employment, and the distribution of income," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 32, pages 2101-2163 Elsevier.
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Cited by:
  1. 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 wp2003n23, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
  2. Bonin, Holger & Schneider, Hilmar, 2006. "Analytical prediction of transition probabilities in the conditional logit model," Economics Letters, Elsevier, vol. 90(1), pages 102-107, January.
  3. John Creedy & Guyonne Kalb, 2003. "Discrete Hours Labour Supply Modelling: Specification, Estimation and Simulation," Treasury Working Paper Series 03/20, New Zealand Treasury.
  4. repec:iab:iabzaf:v:38:i:4:p:475-492 is not listed on IDEAS
  5. Djurdjevic, Dragana, 2005. "Women's Labour Supply after Childbirth: An Empirical Analysis for Switzerland," Darmstadt Discussion Papers in Economics 37208, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute of Economics (VWL).
  6. 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, vol. 8, pages 447-467, November.
  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 2004.11, Institut d'Economie et Econométrie, Université de Genève.
  8. 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.
  9. Peter Haan, . "Conditional logit versus random coefficient models: An analysis using GLLAMM," German Stata Users' Group Meetings 2004 7, Stata Users Group.
  10. 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.
  11. John Creedy & Guyonne Kalb & Rosanna Scutella, 2006. "Income distribution in discrete hours behavioural microsimulation models: An illustration," Journal of Economic Inequality, Springer, vol. 4(1), pages 57-76, April.

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