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Evaluating the Cost-Effectiveness of In-Work Benefits: A Simulation Study for Switzerland

  • Michael Gerfin
  • Robert E. Leu

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. Several European countries have introduced in-work benefits in order to make work pay. 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-effective reform. One-third of expected costs can be attributed to behavioural changes in labour supply. Copyright Verein für Socialpolitik and Blackwell Publishing Ltd. 2007.

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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1468-0475.2007.00414.x
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Article provided by Verein für Socialpolitik in its journal German Economic Review.

Volume (Year): 8 (2007)
Issue (Month): (November)
Pages: 447-467

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Handle: RePEc:bla:germec:v:8:y:2007:i::p:447-467
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  1. 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.
  2. 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.
  3. Vermeulen, Frederic, 2002. " Collective Household Models: Principles and Main Results," Journal of Economic Surveys, Wiley Blackwell, vol. 16(4), pages 533-64, September.
  4. Gerfin, Michael & Leu, Robert E., 2003. "The Impact of In-Work Benefits on Poverty and Household Labour Supply: A Simulation Study for Switzerland," IZA Discussion Papers 762, Institute for the Study of Labor (IZA).
  5. Bargain, Olivier & Orsini, Kristian, 2004. "In-work policies in Europe: killing two birds with one stone?," EUROMOD Working Papers EM4/04, EUROMOD at the Institute for Social and Economic Research.
  6. Ilmakunnas, Seija & Pudney, Stephen, 1990. "A model of female labour supply in the presence of hours restrictions," Journal of Public Economics, Elsevier, vol. 41(2), pages 183-210, March.
  7. David Neumark & William Wascher, 1997. "Do Minimum Wages Fight Poverty?," NBER Working Papers 6127, National Bureau of Economic Research, Inc.
  8. Gerfin, Michael, 1993. "A Simultaneous Discrete Choice Model of Labor Supply and Wages for Married Women in Switzerland," Empirical Economics, Springer, vol. 18(2), pages 337-56.
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