Using Microsimulation to Optimize an Income Transfer System Towards Poverty Reduction
In this study, a static microsimulation model SOMA is used to optimize Finland's tax-benefit legislation to alleviate poverty or at least to reduce it significantly. The method is a classical optimization method using a greed optimization strategy. This means an iterative process, where only one poverty diminishing parameter is changed by 10% from its earlier value at each iteration. Expenses are also optimized to reduce inequality as measured by the Gini-coefficient. Revenues and expenses are balanced at every iteration. Certain parameters of social assistance were found to be the most effective in reducing poverty. However by raising substantially the basic unemployment benefit, basic pensions, housing benefits and study grants - leaving social assistance untouched - poverty was reduced by under 50 percent. This means that social assistance is still required to reduce poverty further. Costs are most effectively financed by raising capital income tax.
Volume (Year): 13 (2010)
Issue (Month): 1 ()
|Contact details of provider:|| |
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Sutherland Holly, 2002. "Indicators for Social Inclusion in the European Union: the Impact of Policy Changes and the Use of Microsimulation Models," Politica economica - Journal of Economic Policy (PEJEP), Società editrice il Mulino, issue 1, pages 117-120.
When requesting a correction, please mention this item's handle: RePEc:jas:jasssj:2008-2-3. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Flaminio Squazzoni)
If references are entirely missing, you can add them using this form.