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The Impact of In-Work Benefits on Poverty and Household Labour Supply. A simulation study for Switzerland

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  • Michael Gerfin
  • Robert E. Leu

Abstract

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. Labour unions propose the introduction of a general minimum wage, whereas the Swiss government promotes in-work benefits. 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-efficient reform. Minimum wages are ineffective in fighting poverty.

Suggested Citation

  • Michael Gerfin & Robert E. Leu, 2003. "The Impact of In-Work Benefits on Poverty and Household Labour Supply. A simulation study for Switzerland," Diskussionsschriften dp0304, Universitaet Bern, Departement Volkswirtschaft.
    • Handle: RePEc:ube:dpvwib:dp0304
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    5. Brown, Charles, 1999. "Minimum wages, employment, and the distribution of income," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 32, pages 2101-2163, Elsevier.
    6. Hoynes, Hilary Williamson, 1996. "Welfare Transfers in Two-Parent Families: Labor Supply and Welfare Participation under AFDC-UP," Econometrica, Econometric Society, vol. 64(2), pages 295-332, March.
    7. Richard Blundell & Hilary W. Hoynes, 2004. "Has 'In-Work' Benefit Reform Helped the Labor Market?," NBER Chapters, in: Seeking a Premier Economy: The Economic Effects of British Economic Reforms, 1980–2000, pages 411-460, National Bureau of Economic Research, Inc.
    8. V. Joseph Hotz, 2003. "The Earned Income Tax Credit," NBER Chapters, in: Means-Tested Transfer Programs in the United States, pages 141-198, National Bureau of Economic Research, Inc.
    9. Timothy Besley & Stephen Coate, 1995. "The Design of Income Maintenance Programmes," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 62(2), pages 187-221.
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    Cited by:

    1. John Creedy & Guyonne Kalb, 2005. "Discrete Hours Labour Supply Modelling: Specification, Estimation and Simulation," Journal of Economic Surveys, Wiley Blackwell, vol. 19(5), pages 697-734, December.
    2. Clauss, Markus & Schnabel, Reinhold, 2008. "Distributional and behavioural effects of the German labour market reform," Zeitschrift für ArbeitsmarktForschung - Journal for Labour Market Research, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 41(4), pages 431-446.
    3. Djurdjevic, Dragana, 2005. "Women's Labour Supply after Childbirth: An Empirical Analysis for Switzerland," Darmstadt Discussion Papers in Economics 144, Darmstadt University of Technology, Department of Law and Economics.
    4. John Creedy & Guyonne Kalb & Rosanna Scutella, 2006. "Income distribution in discrete hours behavioural microsimulation models: An illustration," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 4(1), pages 57-76, April.
    5. Peter Haan, 2004. "Discrete Choice Labor Supply: Conditional Logit vs. Random Coefficient Models," Discussion Papers of DIW Berlin 394, DIW Berlin, German Institute for Economic Research.
    6. Bonin, Holger & Schneider, Hilmar, 2006. "Analytical prediction of transition probabilities in the conditional logit model," Economics Letters, Elsevier, vol. 90(1), pages 102-107, January.
    7. John Creedy & Guyonne Kalb & Rosanna Scutella, 2003. "Income Distribution in Discrete Hours Behavioural Microsimulation Models: An Illustration of the Labour Supply and Distributional Effects of Social Transfers," Melbourne Institute Working Paper Series wp2003n23, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    8. Clauss, Markus & Schnabel, Reinhold, 2008. "Distributional and behavioural effects of the German labour market reform," Zeitschrift für ArbeitsmarktForschung - Journal for Labour Market Research, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 41(4), pages 431-446.
    9. repec:bla:germec:v:8:y:2007:i::p:447-467 is not listed on IDEAS
    10. Müller, Tobias, 2004. "Evaluating the economic effects of income security reforms in Switzerland: an integrated microsimulation - computable general equilibrium approach," MPRA Paper 111919, University Library of Munich, Germany.
    11. Xi CHEN & Ioana SALAGEAN & Benteng ZOU, 2016. "Optimal Income Taxation for the Alleviation of Working-Poverty When Domestic Work is Rewarded," DEM Discussion Paper Series 16-01, Department of Economics at the University of Luxembourg.
    12. Peter Haan, "undated". "Conditional logit versus random coefficient models: An analysis using GLLAMM," German Stata Users' Group Meetings 2004 7, Stata Users Group.
    13. Schneider, Hilmar & Bonin, Holger, 2005. "Wohlfahrts- und Verteilungseffekte eines allgemeinen Freibetrags bei den Sozialabgaben (Welfare and distribution effects of a general fixed allowance for social insurance contributions)," Zeitschrift für ArbeitsmarktForschung - Journal for Labour Market Research, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 38(4), pages 475-492.
    14. Schneider, Hilmar & Bonin, Holger, 2005. "Wohlfahrts- und Verteilungseffekte eines allgemeinen Freibetrags bei den Sozialabgaben (Welfare and distribution effects of a general fixed allowance for social insurance contributions)," Zeitschrift für ArbeitsmarktForschung - Journal for Labour Market Research, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 38(4), pages 475-492.
    15. Michael Gerfin & Robert E. Leu, 2007. "Evaluating the Cost‐Effectiveness of In‐Work Benefits: A Simulation Study for Switzerland," German Economic Review, Verein für Socialpolitik, vol. 8(4), pages 447-467, November.

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    More about this item

    Keywords

    Tax Credits; Household Labour Supply; Microsimulation; Poverty;
    All these keywords.

    JEL classification:

    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities

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