The Role of Minimum Income Schemes in Poverty Alleviation in the European Union

Assessing the effectiveness of Minimum Income (MI) schemes in poverty alleviation is challenging. Studies based on survey microdata are usually subject to bias because households tend to underreport benefit receipts. Studies based on microsimulation models tend to overestimate these benefits mainly due to high non‐take‐up rates. In this paper, we tackle these challenges by calibrating the simulation of MI schemes in the microsimulation model EUROMOD to match official expenditure results for each European Union (EU) Member State's scheme. We use this calibrated model to evaluate the poverty‐alleviating effects of existing MI schemes and explore the impacts of possible reforms toward eradicating extreme poverty. Our results show that MI support varies widely across EU countries, with most failing to reach half of households in extreme poverty or provide adequate support, particularly for larger families. Reforms aimed at improving coverage and adequacy could eradicate extreme poverty at a relatively low budgetary cost.