Evaluating the economic effects of income security reforms in Switzerland: an integrated microsimulation - computable general equilibrium approach

This paper analyzes the economic consequences of various reforms of the Swiss tax-benefit system using a framework which integrates an econometrically estimated microsimulation model of labor supply, a tax-benefit module, and a computable general equilibrium (CGE) model. By contrast to conventional microsimulation exercises, this integrated framework accounts for feedback effects arising in particular from the endogenization of wage rates and from the consistent treatment of the government's budget constraint. Compared to conventional CGE models, this framework provides a much more detailed representation of household income distribution and labor supply behavior. The reform scenarios considered in this paper include different versions of basic income, participation income and low-wage subsidy schemes.