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THE REDISTRIBUTIVE IMPACT OF ALTERNATIVE INCOME MAINTENANCE SCHEMES: A MICROSIMULATION STUDY USING SWISS DATA
Author(s) -
Abul Naga Ramses H.,
Kolodziejczyk Christophe,
Müller Tobias
Publication year - 2008
Publication title -
review of income and wealth
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.024
H-Index - 57
eISSN - 1475-4991
pISSN - 0034-6586
DOI - 10.1111/j.1475-4991.2008.00270.x
Subject(s) - microsimulation , economics , allowance (engineering) , welfare , economic inequality , poverty , work (physics) , labour economics , inequality , econometrics , demographic economics , public economics , economic growth , operations management , engineering , market economy , mechanical engineering , mathematical analysis , mathematics , transport engineering
Taking a benchmark scenario, the current situation in Switzerland, and using a microsimulation technique, we compare the effectiveness of various income maintenance schemes for reducing inequality and poverty. A full negative income tax allowance designed to eliminate poverty is shown to reduce income inequality most drastically. An integrated federal linear tax rate of 62 percent is required to make it viable. Aggregate work hours are reduced by approximately 10 percent and average disposable income falls by 9.3 percent under such circumstances. A participation income restricted to adults in employment and covering 50 percent of subsistence costs is however shown to result in an unambiguous social welfare improvement over the current situation in Switzerland.