The Redistributive Impact of Alternative Income Maintainance Schemes: A Microsimulation Study Using Swiss Household Data

Reference:

Abul Naga, R. H., Kolodziecszyk, C. and Muller, T., 2008. The Redistributive Impact of Alternative Income Maintainance Schemes: A Microsimulation Study Using Swiss Household Data. Review of Income and Wealth, 54 (2), pp. 193-219.

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Abstract

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 pecent 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.

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