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This paper focuses on the possibilities and functionalities offered by the tax-benefit microsimulation model for the UK - UKMOD to simulate and analyse the distributional impact of three examples of Basic Income schemes. We show how to build in functionalities to ensure fiscal neutrality and we aim to highlight some of the trade-offs that implementing a Basic Income scheme brings. This paper doesn't intend to engage with arguments around the desirability of introducing Basic Income but rather focuses on the options that UKMOD offers, giving a couple of examples of schemes based on a set of criteria described below.

This paper evaluates the potential of a common unemployment insurance system for the Economic and Monetary Union (EMU-UI) to improve income protection of atypical workers, namely those in part-time and temporary contracts. We use EUROMOD, the European tax-benefit microsimulation model, to simulate entitlements to national and EMU-UI and assess their effects on the household disposable income of atypical workers in the event of unemployment. Our results show that there are sizable gaps in the coverage of national UI schemes between countries, with atypical workers having particularly low coverage rates. The introduction of an EMU-UI would reduce coverage gaps and increase net replacement rates, especially for atypical workers, and would protect a large share of the workforce against the risk of poverty. Extending eligibility for the EMU-UI to the self-employed would further improve income protection, reducing their risk of falling into poverty in the event of unemployment.

In this paper we want to provide an utopian attempt to tackle inequality and to tackle, most specifically, what we consider the cultural and ethical origin of inequality: paid work. We believe that a globalised world, structured around the asymmetry between an increasingly small number of employers and an increasing, almost unlimited, supply of always available employees, leads to increasing inequalities. Under our perspective, in the post-industrialised economies of all major developed countries, paid work cannot be seen anymore as an instrument of self-determination (Marx, 1844) but becomes the main generator of exploitation and poverty. For this reason, we try to develop a benefit with attached strong disincentives to paid work that should provide people with an exit strategy and higher bargaining power. After presenting the main typologies of income benefits that are normally in use or discussed we provide a theoretical explanation of the Universal Independence Income (UII) benefit we want to introduce. We simulate the introduction of our preferred version of UII, two variations of UII and five forms of Universal Basic Income (UBI) to be compared with the tax and benefit system currently in place in the UK. Our main findings suggest that UII has a positive effect on inequality an almost null effect on poverty and strong positive effects on work disincentives.

Means-tested transfer schemes in Europe and elsewhere tend to include not only income tests but also asset tests of various sorts. The role of asset tests in minimum income protection provisions has been extensively researched in the Anglo-Saxon context. Far fewer authors have assessed the role of asset tests on social policy in a continental European context. Although asset tests may be useful in singling out the more deserving of the poor, we know relatively little of their actual impact on eligibility and social outcomes in European welfare states. This paper looks at the prevalence and design of asset tests in European minimum income protection schemes. We distinguish between two main types of asset tests: outright disqualification when assets reach a certain value, versus a more gradual tapering at a fictional rate of return. We then analyze in greater detail how asset tests in Belgium and Germany, as representatives of these two types, affect minimum income protection eligibility and poverty outcomes. We use the EUROMOD microsimulation model on the Household Finance and Consumption Survey data in order to assess the effects of asset tests. This survey was explicitly designed to more realistically reflect assets and capital incomes.

The aim of this paper is twofold. First, it provides a comprehensive assessment of the financial cost informal workers would incur if they entered formal employment in five Latin American countries: Bolivia, Colombia, Ecuador, Peru, and Venezuela. Then, it analyzes the extent to which formalizing informal workers would contribute to increase fiscal capacity. Our results show a wide variation in formalization tax rates ranging between 8.5 percent in Venezuela and 65 percent in Colombia. Formalization costs are particularly high for self-employed informal workers, and mainly driven by the burden associated to social insurance contribution payments. Interestingly, potential formalization of informal workers with the highest probability of being formal would allow capturing a substantial share of the additional tax revenue lost due to informality and would reduce inequality. The comparative analysis highlights the possibility of adopting strategies to reduce the financial burden to formalization of certain population groups in the region.

We nowcast the economic effects of the Covid-19 pandemic and related lock-down measures in the UK and then analyse the distributional and budgetary effects of the estimated individual income shocks, distinguishing between the effects of automatic stabilisers and those of the emergency policy responses. Under conservative assumptions about the exit strategy and recovery phase, we predict that the rescue package will increase the cost of the crisis for the public budget by an additional £26 billion, totalling over £60 billion. However, it will allow to contain the reduction in the average household disposable income to 1 percentage point, and will reduce poverty rate by 1.1 percentage points (at a constant poverty line), with respect to the pre-Covid situation. We also show that this progressive effect is due to the increased generosity of Universal Credit, which accounts for only 20% of the cost of the rescue package.

A Citizen's Basic Income, sometimes called a Basic Income, a Universal Basic Income, or a Citizen's Income, is an unconditional and nonwithdrawable income paid to every individual. There have been calls during the coronavirus crisis for both an Emergency Basic Income (an immediate Basic Income to protect individuals' incomes) and for a Recovery Basic Income (a Basic Income to be implemented with a view to preventing a recession once the virus outbreak begins to subside), and also for a permanent Citizen's Basic Income scheme. This working paper summarises the results of microsimulation research on a Recovery Basic Income and on a subsequent sustainable revenue neutral Citizen's Basic Income. An appendix studies the implementation of a Citizen's Basic Income scheme in the context of different Universal Credit roll-out assumptions.

This paper experimentally studies labour supply responses to earnings uncertainty. 301 low-income, working age, non-student individuals took part in an on-line experiment simulating standard and zero-hours contractual conditions. Results unambiguously support the hypothesis that work uncertainty discourages work. This is not only because variability in work availability reduced total expected pay but also because uncertainty itself is perceived as detrimental. Uncertainty is avoided even at the cost of lower total earnings. Interactions between work related uncertainty and the benefit system are important. Both the use of benefits as insurance when work is unavailable and benefit sanctions can increase incentives to take up insecure work.

The unequal distribution of income is a fundamental determinant of health inequalities. Decision making around economic policies could be enhanced by showing their potential health effects. We used scenario modelling to assess the effects of 12 income-based policies on Years of Life Lost (YLL) and inequalities in YLL in Scotland. EUROMOD, a tax-benefit microsimulation model, was used to estimate the effects of hypothetical fiscal policies on income for Scottish households (n=2871; 2014/15 Family Resources Survey). Income change was estimated for each quintile of the 2016 Scottish Index of Multiple Deprivation. 'Triple I', a health inequalities scenario modelling tool, was used to estimate policy effects on YLL and government spending after 5 years. The best policy for improving health and narrowing health inequalities was a 50% increase to means-tested benefits rates (approximately 105,177 or 4·7% YLL fewer than the baseline scenario, and a 7·9% reduction in relative index of inequality (RII)). Citizen's Basic Income (CBI) schemes also substantially narrowed inequalities (3·7% RII for basic scheme, 5·9% for CBI with additional payments for disabled individuals), and modestly reduced YLL (0·7% and 1·4%, respectively). The most effective policies for reducing health inequalities appeared to be those that disproportionately increased incomes in the most deprived areas.

A Citizen's Basic Income, sometimes called a Basic Income, a Universal Basic Income, or a Citizen's Income, is an unconditional and nonwithdrawable income paid to every individual. The purpose of this paper is to summarise the results of microsimulation research on Citizen's Basic Income schemes undertaken by this author during the past fifteen years; to update recent research; and to reflect on the journey taken by that research. The paper explores the ways in which the contemporary policy context and constructive criticism of previous research projects have resulted in changes to the methods employed, discusses ways in which the research has influenced the policy process, and draws comparisons with the work of other microsimulation researchers. The increasingly lively debate on Citizen's Basic Income has generated a wide variety of questions relating to Citizen's Basic Income's feasibility, and the penultimate section of this paper addresses some of the most pressing of those questions. A final section draws lessons from the research journey recounted in this paper, and suggests avenues for future research activity.

This paper aims to explore how housing allowances and mortgage interest tax relief have evolved in recent years, against the background of falling disposable incomes and rising housing costs. The analysis focuses on seven EU countries (Greece, Italy, Austria, Hungary, the Netherlands, Sweden and the UK), covering a range of housing market developments and housing policy responses. The first part of the paper provides an overview of housing market trends over the period following the financial crisis and examines recent changes in housing policies in the countries concerned. The next part discusses the main features of two specific housing policy instruments, housing allowance and mortgage interest tax relief, also exploring recent changes there and the motives behind these. The last part estimates the distributional impact of housing allowances and mortgage tax relief in 2016 as compared with 2007 using the European tax-benefit model EUROMOD. The paper concludes with a discussion of the results and of the policy implications.

Non-take-up of means tested benefits is a wide spread phenomenon in European welfare states. The paper assesses whether the reform that replaced the monetary social assistance benefit by the minimum income benefit in Austria has succeeded in increasing take up rates. We use EU-SILC register data together with the tax-benefit microsimulation model EUROMOD/SORESI. The results show that the reform led to a significant decrease of non-take-up from 53% to 30% in terms of the number of households and from 51% to 30% in terms of expenditure. Estimates of a two-stage Heckman selection model show that pecuniary determinants (higher degree of need), lower applications costs (unemployment, low education, renting one's home) and lower psychological barriers (size of municipality and lone-parenthood) are predictors of taking up the benefit.

This paper looks at the effects of tax-benefit systems and social stratification determinants on the probability of poverty among mothers after childbirth and divorce/separation. The analysis was carried out for twelve EU countries, which represent a variety of welfare regimes providing different degrees of defamilialisation. We applied the stress-testing methodology using microsimulation techniques as proposed by Atkinson (2009) and carried out a regression analysis of the simulated results. We show that the degree of income replacement provided by the welfare state is higher for childbirth than for divorce. Countries with low post-childbirth poverty include those with an explicit pro-natalist orientation and socio-democratic regimes. High post-childbirth poverty rates are found in pro-traditional and South European conservative countries, and especially in the liberal regimes. The same is true for the post-divorce poverty rates. Moreover, our findings confirm that the mother's occupational class has a statistically significant effect for predicting poverty in the case of both events, with a stronger social gradient in case of divorce. Cross-country variation in the social gradient for post-childbirth poverty was insignificant. For post-divorce poverty we find weaker social class effects in the highly defamilialised welfare systems (Scandinavian countries and France) and stronger social class effects in the UK and the post-socialist countries.

This paper aims to show how the newly developed Hypothetical Household Tool of the EUROMOD microsimulation model can be used to generate institutional minimum income protection indicators. It does so by updating the CSB's Minimum Income Protection Indicators (CSB-MIPI) dataset using EUROMOD and HHoT. We discuss the necessary assumptions for this exercise, and describe, present and validate the obtained indicators. In doing so, we provide and discuss both an updated minimum income protection indicator dataset, and give guidance to researchers who want to use the flexibility of HHoT to calculate purpose designed minimum income protection indicators.

Tax-benefit microsimulation models are typically used to assess the impact of policy changes on the income distribution based on micro data representative of the population. Such analysis assesses the effects of tax-benefit policies by considering their interaction effects and the population structure, which are both important elements for an overall assessment of complex realities. However, it can be helpful to abstract from this complexity and to explain the effects of tax-benefit policies using concrete examples. Using hypothetical households visualises how single policies are linked with each other while leaving the additional complexity of the population structure aside. This paper uses the Hypothetical Household Tool (HHoT) to generate hypothetical household data that can be used in EUROMOD, the tax and benefit microsimulation model of the European Union, to analyse current tax and benefit policies as well as the effects of policy changes in a comparative manner. The paper provides a brief introduction of the use of hypothetical data in general and presents concrete examples of its application. The main part proposes a set of basic indicators that can be used to learn about European tax-benefit systems in a comparative perspective.

This is an addendum to EUROMOD working paper EM 12/17, which updates, corrects and extends the previous evaluation of an illustrative Citizen's Basic Income scheme. Debate about Citizen's Basic Income - an unconditional and nonwithdrawable income for every individual - has shifted in character. An earlier phase related to the proposal's desirability; then followed debate about its feasibility; and now attention has turned to questions of implementation. Working paper EM 12/17 operationalised characteristics of two implementation models in terms of changes that might be required in existing UK tax and benefits systems, and it evaluated the implementation methods in relation to a wider variety of indicators than previous exercises of this kind: poverty and inequality indices, tax rate rises required for revenue neutrality, household disposable income gains and losses, households' abilities to escape from means-testing, and marginal deduction rates. This addendum employs EUROMOD H1.0+ to update the evaluation of one of the two implementation methods, to make a correction in one of the marginal deduction rates, and to extend the evaluation by calculating the number of households able to escape from all means-tested benefits, and by calculating the gains and losses that would be experienced by households containing individuals with disabilities.

In empirical analysis, the Kakwani index is the most frequently used indicator for comparing progressivity across countries and over time. The Kakwani is often assumed to measure to what extent a policy design is targeted to the poor. It has, however, a major drawback: it is not defined for net tax incidence - that is, the whole system of taxes and benefits. Moreover, it is defined over different intervals for different pre-tax income distributions and different average tax rates. This paper proposes an extension to Kakwani index based on the concept of relative redistributive efficiency that is not affected by these drawbacks. The Redistributive Efficiency index was compared to the Kakwani index for taxes/benefits in EU countries by using Euromod baselines. In addition, the Redistributive Efficiency index was computed on the whole tax-benefit system; that is, taxes and benefits were evaluated together. Only Ireland and the UK combine high levels of redistributive efficiency with a relevant amount of tax revenues and social expenditures. They obviously obtain very high redistribution, above 15 points. Most of the countries considered show an intermediate level of redistribution (between 7 and 12 points), but with a different mix. A group of Central and Northern European countries plus Slovenia and Hungary combine medium levels of redistributive efficiency and medium size, while some Southern European countries (Spain and Portugal) and new members compensate a rather low amount of transfer and taxes with quite high levels of efficiency. The remaining new member states and Southern EU countries show a very low level of redistribution, below 7 points. Interestingly, they vary in the level of tax burden and of resources devoted to benefits but all of them show a poor Redistributive Efficiency. This suggests that low Redistributive Efficiency plays a key role in explaining why certain countries perform a limited amount of redistribution.

The aim of this research note is to analyse the distributional impact of five types of local social benefits (compensation for housing costs, old-age income supplement, grant for a newborn child, kindergarten subsidy and city transport subsidy) in the four major Croatian cities - Zagreb, Split, Rijeka and Osijek - which is a first analysis of this kind for Croatia. Using miCROmod - the Croatian tax-benefit microsimulation model, a comparative analysis of benefits and their generosity has been conducted; their income redistribution and poverty reduction effects have also been investigated. Results reveal that, in all local benefit systems considered, the most significant resources are devoted to the city transport subsidy and the kindergarten subsidy. If we compare the per capita values, the most generous benefits are found in Zagreb, followed by Rijeka, Osijek and Split. Also, social protection benefits of Zagreb and Rijeka are the most redistributive, achieving the highest poverty headcount reduction.

A series of social benefits targeting vulnerable groups, such as the elderly population, has been implemented in Ecuador over the last few decades. Elderly adults living in vulnerable conditions and not affiliated with social security are entitled to noncontributory pension assistance under the Human Development Transfer program. However, over one quarter of old-age beneficiaries still live in poverty and the recent fall in oil prices has put increasing pressure on government expenditures to deliver such schemes. This paper aims to assess the current needs of old-age adults based on expenditure data, and makes use of microsimulation techniques to evaluate the effect of covering those needs through an increase in pension assistance. Our results show that increasing pension assistance to match the level of the poverty line in Ecuador would reduce elderly poverty by 40% and would take 18% of old-age beneficiaries out of poverty. We analyze the effect of additional hypothetical reforms and discuss the importance of using microsimulation techniques, in particular to assess the effect of budget neutral reforms in a macroeconomic environment with low oil prices.

This paper aims to disentangle the driving factors behind the changes in income inequality in the Baltics since the EU accession, distinguishing between primary income effect, discrete changes in tax-benefit policies and demographic effect. Evaluation of the three effects was based on counterfactual scenarios, which were constructed using taxbenefit microsimulation and re-weighting techniques. Decomposition of the total change in inequality showed that income and policy effects are dominant in the Baltics. Policy effects were inequality reducing before the crisis and for the period after the EU accession as a whole. Income effects were inequality increasing before the crisis and as a whole. Despite rapid demographic changes in the Baltics, the demographic effects on income inequality were marginal and in general inequality-increasing.

This paper aims to propose a social protection system that "decommodifies" labour and fulfills the properties of a Social Protection Floor satisfying revenue-neutrality. To this end, firstly, a Universal Basic Income (UBI) scheme is explored. Secondly, the UBI is transformed into a Negative Income Tax (NIT) scheme, providing universal protection instead of universal benefits. Finally, the NIT is modified into a Hybrid NIT (HNIT), being a mixture of NIT and a classic social assistance scheme. It features a 100% withdrawal rate, consequently allowing for a higher guaranteed minimum income level than would be possible with either an NIT or UBI. A static microsimulation, using the EUROMOD model, is conducted on the HNIT scheme, implementing two scenarios. One scenario establishes what the maximum levels of entitlements could be, assuming revenue-neutrality and current marginal tax levels. The other scenario assumes more generous entitlements and computes which tax rates would be necessary to pay for such a scheme. The models are applied to both Italy and the United Kingdom. The results are interpreted in terms of poverty and inequality statistics while closely looking into the assumptions of the microsimulation models. In the first scenario a modest level of guaranteed minimum income is feasible, decreasing both poverty and inequality decidedly compared to current levels. This effect is even stronger in the second scenario, however, it results in unrealistically high tax rates, especially for Italy. The impact on poverty and inequality of the HNIT scheme is markedly higher for Italy in both scenarios suggesting that the United Kingdom has currently a social protection system in place that redistributes more efficiently than Italy.

It is widely recognized that childcare has important pedagogical, economic and social effects on both children and parents. This paper is the first attempt to estimate a joint structural model of female labour supply and childcare behaviour applied to Italy in order to analyse the effects of relaxing the existing constraints in terms of childcare availability and costs by considering public, private and informal childcare. Results suggest that Italian households might alter their childcare and labour supply behaviours substantially if the coverage rate of formal childcare increases to reach the European targets. Overall, increasing child care coverage is estimated to be more effective in enhancing labour incentives than decreasing existing child care costs, at the same budgetary cost.

Debate about Citizen's Basic Income - an unconditional and nonwithdrawable income for every individual - is shifting in character. An earlier phase related to the proposal's desirability; then followed debate about its feasibility; and now attention is turning to questions of implementation. A significant symptom of this new phase is the recent consultation on implementation of a Citizen's Basic Income held by the Institute of Chartered Accountants in England and Wales. The consultation considered four implementation methods. This working paper operationalises characteristics of two of the implementation models in terms of changes that might be required in existing UK tax and benefits systems, and evaluates the implementation methods in relation to a wider variety of indicators than previous exercises of this kind: poverty and inequality indices, tax rate rises required for revenue neutrality, household disposable income gains and losses, households' abilities to escape from means-testing, and marginal deduction rates. The advent of EUROMOD G4.0+ and updated FRS data enables the results to be more up to date as well as more comprehensive.

We provide evidence of the relative cost-effectiveness of different types of policy instrument in reducing poverty or limiting its increase, comparing within and between seven diverse EU countries. We do that by measuring the implications of increasing/reducing the instrument size within its national context, using microsimulation methods. We consider commonly-applied policy instruments with a direct effect on household income: child benefits, minimum income components of social assistance, income tax lower thresholds and minimum wages and a benchmark case of changing the size of the whole tax-benefit system. We find that the assessment of the most cost effective instrument may depend on the measure of poverty used and the direction and scale of the change. Nevertheless, our results indicate that the options that reduce poverty most cost-effectively in most countries are increasing child benefits and social assistance while reducing the former is a particularly poverty-increasing way of making budgetary cuts.

We summarise and decompose changes in the household disposable income distribution in 2007-2011 across 27 EU countries to study the impact of the Great Recession on household incomes and the key factors contributing to it. Using microsimulation techniques and applying the EU tax-benefit model EUROMOD in combination with EUSILC household micro-data, we separate direct (first-order) effects of tax-benefit policy on the income distribution from the effects of changes in household market incomes and characteristics. There is substantial variation in income dynamics between and within countries. We find that in most countries, changes in market income and population characteristics had a poverty- and inequality-increasing effect, while policies were more often poverty- and inequality-reducing. However, there is no clear country-level correlation between the two effects in this period.

In-work benefits (IWBs) have become very common transfer programs that seek to meet both efficiency and equity targets. An expanding literature has assessed the effects of these policies on income distribution and labor supply showing important implications for female labor participation. In this paper, we estimate the distributional and behavioral impacts of a simulated IWB in Spain based on the replacement of the existing working mother tax credit (WMTC) using as a reference the US Earned Income Tax Credit (EITC). We simulate the effects of the proposed scheme using EUROMOD and a discrete choice model of labor supply. Our results show that the enhancement of the proposed IWB would have significant and positive effects both in terms of female labor participation and inequality and poverty reduction. The introduction of this IWB would generate a substantial increase in labor participation at the extensive margin and a non-negligible reduction at the intensive margin.

How can poverty reduction be improved and at what cost? Available evidence suggests that social investment strategies and employment policies are important but not sufficient. In order to reduce the number of people below the relative at-risk-of-poverty threshold of the EU, countries must develop not only effective employment policies but also ensure adequate social protection. This implies increasing social transfers for working and nonworking households, while protecting work incentives. In this paper we show that this is not a cheap option. We calculate the hypothetical cost of closing the poverty gap while maintaining the existing average labour market participation incentives at the bottom of the income distribution. We do it in three of the most developed welfares states of the EU, representing different welfare regimes, namely Belgium, Denmark and the United Kingdom. Results show that this would require around two times the budget needed to just lift all disposable household incomes to the poverty threshold. The cost would obviously be lower in countries with smaller poverty gaps and with weaker participation incentives. Furthermore, the results suggest that for anti-poverty strategies to be effective other factors should be considered more carefully, including the drivers of rising inequalities in market incomes, and especially the downward pressures on low wages, as well as the most appropriate magnitude of financial work incentives.

Policy over the past years has seen a gradual movement away from universal social benefits towards the provision of more targeted benefit schemes. Using the European tax-benefit microsimulation model EUROMOD, this paper aims to compare the effectiveness of income-tested benefits at different points in the economic cycle. This objective is considered in terms of coverage of households with incomes falling below various thresholds and importance in terms of the fraction of total resources that these benefits provide. The prevalence and relative weight of income-tested benefits throughout the income distribution is also examined. We compare the situation in 2009 with that in 2014 (or 2013) for fifteen EU Member States experiencing differing economic conditions over the period in question, including those which have been affected comparatively little by the crisis as well as those which have witnessed severe reductions in economic activity and employment levels and those in strong recovery by 2014. As EU-SILC micro-data containing household income for 2013 or 2014 are not available yet, standard EUROMOD routines are enhanced with additional adjustments to the EU-SILC based input data in order to take into account changes in the labour market. We attempt to indicate the sensitivity of the estimated policy effectiveness indicators to these particular changes. We conclude by discussing the methodological pitfalls and main findings of this research.

A Citizen's Income - an unconditional and nonwithdrawable income for every individual - would offer many advantages: but because the UK's current benefits and tax systems are complex, transition to a benefits system based on a Citizen's Income could be difficult to achieve. Two previous EUROMOD working papers have studied some of the effects and financial feasibilities of a variety of Citizen's Income schemes.2 The advent of EUROMOD G3.0, and the availability of new FRS data, has made possible a more up to date evaluation of one of the schemes discussed in the second of the earlier working papers: a strictly revenue neutral scheme that could be paid for by raising Income Tax rates by 3%, by abolishing Income Tax Personal Allowances, and by making adjustments to National Insurance Contributions, and that would leave in place the existing social security structure and reduce households' means-tested benefits by taking into account their Citizen's Incomes. The earlier working papers show that such a scheme would impose almost no disposable income losses on low income households at the point of implementation, and would impose only manageable losses on households in general. This new working paper updates the previous research on such a scheme, offers a variety of additional evaluations, and studies the possibility of paying a Citizen's Income to a single year cohort as a first step in rolling out such a Citizen's Income scheme to the entire working age population.

This is an addendum to EUROMOD working paper EM 5/16, revisiting an illustrative Citizen's Income scheme developed in that paper. It makes a necessary adjustment to the scheme, and then develops a method for organising a Citizen's Income pilot project.

We apply microsimulation techniques to estimate the first-order effects of tax-benefit policy changes since the beginning of the financial and economic crisis in 2008. Using the EU tax-benefit model EUROMOD in combination with the EU-SILC 2012 micro-data, we provide comparative estimates for EU-27 in 2008-2014 as well as for 21 EU member states in 2014-2015. The analysis covers direct tax and cash benefit changes and evaluates their effects on the income distribution, poverty and inequality levels, holding population characteristics and market incomes constant, thereby, isolating direct policy effects from other factors shaping the income distribution. Two different indexation approaches are used to adjust benchmark policies over time - prices and market incomes - and explore the sensitivity of results. We find substantial cross-national variation throughout the whole period. At the EU level, policy changes in the first half of the period (2008-2011) were poverty-reducing and had a positive effect on mean incomes, while the effects were the opposite in the later period (2011-2014); and inequality-reducing in both periods.

We investigate the impact of the Romanian and Czech family policy systems on the income distribution and poverty risk of families with children. We focus on separating out the effects of the policy design itself, size of the benefits and the interaction between policies and population characteristics. We find that interactions between population characteristics, the wider tax benefit system and child related policies are pervasive and large. Both population characteristics and the wider tax-benefit environment can dramatically alter the antipoverty effect of a given set of policies.

A substantive body of research highlights the existence of framing effects in labour supply responses to taxation challenging traditional models that assume taxes only influence behaviour via the budget constraint. Using a lab experiment, this paper examines the presence of differential responses to identical marginal tax schedules coming from direct taxation and from benefit withdrawal respectively. In an incentivised real-effort task, subjects supply time and effort while facing an incentive structure that is framed as taxation or benefit withdrawal respectively, while yielding the exact same budget constraint. Results indicate that subjects in the benefit withdrawal condition are more likely to reduce working time compared to both subjects in the tax treatment and a control group where the incentive structure is described without using the language of taxes and benefits. The effect is driven by loss-averse individuals suggesting that benefit streams may be subject to an 'endowment effect'. The findings have clear implications for welfare policy design.

Due to the worsening of economic crisis across European countries, the problem of poverty and the ways to tackle it returned at the centre of political and scientific debate. The level of poverty increased after the crisis, especially in Mediterranean countries such as Italy, Spain and Greece. One of the main measures to protect individuals against poverty and social exclusion is Minimum Income (MI). Since 1992 the European Commission, with the Council Recommendation 92/441/EEC, called for the introduction in all Member States of a guaranteed MI. In 2010, as part of the Europe 2020 Strategy, a resolution of the European Parliament emphasized the role of MI in fighting poverty and promoting an inclusive society. Almost all EU countries adopted a MI with different rules and approaches, but Italy still lacks a universal form of protection against poverty and social exclusion. Accordingly, this paper has two main aims: first, to study European experiences of MI; second, to estimate costs and benefits of a proposal for a MI in Italy. In order to achieve these goals EUROMOD, the tax-benefit microsimulation model for the European Union, will be used.

A Citizen's Income - an unconditional and nonwithdrawable income for every individual - would offer many advantages, but because the UK's current benefits and tax systems are complex, transition to a benefits system based on a Citizen's Income could be difficult to achieve. This paper builds on the results contained in a previous EUROMOD working paper 2 by proposing two financially feasible ways of implementing a Citizen's Income. The first method would be an 'all at once' method. That is, it would establish a small Citizen's Income for every citizen of the UK, of whatever age. This paper shows that a strictly revenue neutral scheme is available that could be paid for by raising Income Tax rates by 3%, by abolishing Income Tax Personal Allowances, and by making adjustments to National Insurance Contributions. This scheme would impose almost no household disposable income losses on low income households at the point of implementation, and manageable losses on households in general. A second method - a 'one step at a time' method - would turn Child Benefit into a Child Citizen's Income, then establish a Young adult Citizen's Income, and then enable those in receipt of the Young adult Citizen's Income to keep their Citizen's Incomes as they grow older. This method of implementation would impose almost no losses in household disposable income at the point of implementation. The paper concludes that both 'all at once' and ''one step at a time' methods would be financially feasible.

Using the tax-benefit microsimulation model EUROMOD and Family Resources Survey, we investigate what would have happened to child poverty in the UK in the periods 2010/11-2015/16 and 2015/16-2020/21 under a range of different indexation scenarios of children's benefits. We find that between 2010/11 and 2015/16 both the relative and absolute child poverty rates would have been lower if children's benefits were uprated by RPI or if the government had introduced the Child Tax Credit uprating package it promised in 2010. Uprating children's benefits up to 2020/21 as announced by the government in the Autumn Financial Statement in 2014 would result in real benefit cuts and increase in child poverty. However, triple lock indexation of children's benefits would sustain their real value and would reduce child poverty rates substantially.

More than half of the EU countries have become poorer and more unequal since the start of the crisis in 2008. Despite lack of timely household micro data, using microsimulation techniques with up-to-date information on policy rules enables us to estimate the direct effect of tax-benefit policy changes in 2008-2014 on the income distribution, poverty and inequality levels in 10 EU countries, as well as track most recent trends by evaluating policy effects in 2013-2014. We identify and quantify these effects using the EU tax-benefit model EUROMOD to construct relevant counterfactual scenarios. Our results indicate that among these countries, most managed to pursue policies without adverse distributional effects, despite of challenging economic problems in this period. However, this has been accompanied by reductions in household income in several countries. There have also been some cases of clearly regressive changes in particular policy instruments. Overall, our results demonstrate the importance of comprehensive regular indexation to avoid the erosion of benefit amounts and tax thresholds over time, and specific population groups systematically gaining or losing relative to others.

The aim of this paper is to evaluate the impact of cash social benefits on work incentives at the bottom of the income distribution and among selected model family types in Lithuania. The analysis of the work incentives in Lithuania is carried out for the period of 2005-2013 based on a combination of measures estimated using tax-benefit microsimulation model EUROMOD and official OECD/EC indicators. The analysis revealed high disincentives to work at the bottom of the Lithuanian income distribution, dominated by the effect of cash social benefits compared to taxes or social insurance contributions. A strong trade-off between benefit adequacy and work incentives is built into the design of the Lithuanian cash benefit system, that of social assistance in particular. The challenge for policy design is thus to encourage and promote active labour market participation among low earners without eroding the minimum income protection floor.

This paper examines the likely impact of Universal Credit on the incomes and work incentives of single parent families. Using the UK module of EUROMOD (version F6.20), we also simulate how single parents' household income, and their work incentives, would change following adjustments to the universal credit structure. We examine four main alternative scenarios: 1) reducing the overall universal credit taper rate from 65% to 55%; 2) Increasing the basic (standard) allowances in universal credit for single parents; 3) Increasing the earnings disregard in universal credit for single parents and 4) Increasing the income tax threshold for the basic tax rate. We also examine the impact on single parents of an increase in the minimum wage. Finally, we examine the impact on the Exchequer of a five percentage point increase in the single parent employment rate, in terms of benefits saved and taxes paid.

The UK Government enacted simplification of its tax credit system in 2003. An inter- esting consequence of the reform is that tax credit payments were split between partners in couples, causing a rare wallet to purse transfer. This paper presents evidence on the effects of the reform on family spending, using quasi-likelihood techniques, for a sample of low income couples with children. In areas of child goods, evidence of important spending increases are found, whereas spending decreases are observed amongst goods that disproportionately ben- efit parents. A further key finding is an apparent trade-off between spending on public goods that are not exclusively consumed by children, but may nonetheless have a child development dimension. Results are contrasted to earlier findings from UK 1970s child benefit reforms. The effects are consistent with a non-cooperative bargaining framework, in which partners differ in their relative preference for different household public goods.

We consider a difference-in-differences setting with a continuous outcome, such as wages or expenditure. The standard practice is to take its logarithm and then interpret the results as an approximation of the multiplicative treat- ment effect on the original outcome. We argue that a researcher should rather focus on the non-transformed outcome when discussing causal inference. Fur- thermore, it is preferable to use a non-linear estimator, because running OLS on the log-linearised model might confound distributional and mean changes. We illustrate the argument with an original empirical analysis of the impact of the UK Educational Maintenance Allowance on households expenditure, and with a simulation exercise.

The systems of direct taxes and cash benefits in the 27 Member States of the European Union (EU) vary considerably in size and structure. We explore their redistributive effects using EUROMOD, the tax-benefit microsimulation model for the EU. As well as describing redistributive effects in aggregate this allows us to assess and compare the effectiveness of individual types of policy in reducing income disparities. We consider the following categories of benefits and taxes: income taxes, tax allowances, tax credits, social contributions, cash benefits designed to target the poor or redistribute inter-personally (through means-testing) as well as cash benefits intended to redistribute intra-personally across the lifecycle (through social insurance or contingency-based entitlement). We derive results for the 27 members of the European Union using policies in effect in 2010 and present them for each country separately as well as for the EU as a whole.

Citizen's Income - an unconditional and nonwithdrawable income for every individual - would offer many advantages, but transition from the UK's current largely means-tested benefits system to one based on a Citizen's Income might generate initial losses for some low-income households, and this could make a Citizen's Income politically unattractive. This paper employs EUROMOD to study the initial losses that a variety of different Citizen's Income schemes would generate, and finds that in those schemes in which a Citizen's Income replaces most means-tested benefits, substantial household losses would occur, both generally and for households in the lowest disposable income decile, whereas where means-tested benefits are not abolished, but instead the Citizen's Income reduces means-tested benefits in the same way that other existing income does, almost no households in the lowest disposable income decile suffer initial losses, and initial losses generally are at a manageable level. This means that there is at least one method for implementing a Citizen's Income that could be politically attractive.

This paper analyses programmes of cash allowances for children and compares their effectiveness in combating child poverty in Russia and four EU countries Sweden, Germany, Belgium and the United Kingdom. These countries are selected as representatives of alternative family policy models. Using microsimulation models (RUSMOD and EUROMOD), this paper estimates the potential gains if the Russian system were re-designed along the policy parameters of these countries and vice versa. Such an exercise rests on the idea of policy learning and provides policy relevant evidence on how a policy would perform, given different national socio-economic and demographic settings. The results confirm that the poverty impact of the program design is smaller than that of the level of spending. Other conditions being equal, the best outcomes for children are achieved by applying the mix of universal and means-tested child benefits, such as those employed by the UK and Belgium. At the same time, the Russian design of child allowances does not appear to be less effective in terms of its impact on child poverty when transferred to European countries in place of their current arrangements.

Nowadays, Cyprus has engaged in an effort of reforming its tax-benefit system so as to adapt to the economic and social challenges of the post-crisis era. Among the most important social reforms is the introduction of a Guaranteed Minimum Income scheme (GMI). In this paper, we construct a number of hypothetical reform scenarios using the EUROMOD microsimulation model aiming at examining how certain features of the policy design affect the policy outcomes of the reform. The empirical analysis is accompanied with a wider discussion of the driving forces of the reform and the challenges which policymakers are expected to confront when implementing the new welfare scheme in the particular context of Cyprus.

Policy has long been based on the assumption that disabled people are either capable, or incapable, of work. This paper extends earlier analyses which show that the probability of employment is a variable, not an absolute. The disability employment penalty varies by number, type, severity and duration of impairments. Many impaired people's job prospects are scarcely affected, and they are probably not "disabled" at all. Others have very low chances of employment, and fit the concept of "incapacity". In between is a group who face serious barriers, without work being ruled out altogether. This "50:50" group may be the primary focus of policy interest.

This paper provides an account of the construction of a tax-benefit microsimulation model for Namibia (NAMOD) which is based on the EUROMOD platform F6.0. Previous research on social security provision in Namibia is reviewed and the current social security, personal income tax and value added tax arrangements are outlined. Various strengths and weaknesses of the Namibian Household Income and Expenditure Survey (NHIES) as an underpinning dataset for NAMOD are highlighted. In particular, the income data in the NHIES is problematic and so analysis of the impact of policies on poverty should be treated with caution. In spite of these challenges, NAMOD provides a starting point from which government can explore issues such as promoting take-up of grants or making changes to the social security system.

This paper looks into the role the tax-benefit system plays in mitigating the effects of widespread socio-economic risks in the context of individualization, welfare state transformation and recent austerity. We analyse the drivers behind the changing role of the risk-mitigating social policies looking through the theoretical lenses of the risk society. The performance of the tax-benefit system in providing a safety net against income loss in cases of unemployment and childbirth is evaluated using the stress-testing approach suggested by Atkinson (2009). The analysis suggests that the role of the welfare state shifts towards promotion of individual responsibility for risk management. The welfare state policies can produce substantially different levels of vulnerability to poverty among population groups facing different risks. In the context of the recent economic crisis in Lithuania, the lack of the counter-cyclical protection provided by the welfare state is apparent, while the traditional mutual support among the household members still plays a major role in the risk management process.

The Australian income tax and transfer system has undergone considerable reform since the mid 1980s. As a number of commentators have pointed out, one impact of reforms to cash transfers for families, as well as of some reforms to direct taxes, has been the evolution of a defacto system of family taxation, with negative consequences, in terms of incentives to earn (and consequent deadweight loss), for parents, and especially for secondary earners in couple families with children. In this paper, we use a new Australian microsimulation model, ATM, built on the EUROMOD platform to examine the extent to which policies to support families with children through the tax and transfer system have been achieved at the expense of gender equity, and how the system could be better designed to achieve child poverty reduction with gender equity. Our analysis suggests that the institution of a universal family payment that would both improve incentives and reduce child poverty is potentially affordable, even before reduction of deadweight loss under the current system is taken in to account. However, such reforms as are modelled here would be politically difficult, since the main gainers would be families with children in the top half of the income distribution, and the main losers would be taxpayers who do not have dependent children.

Less visible than benefit expenditure, spending channelled through the tax system via tax concessions and advantages can amount to substantial amounts of foregone revenue. In this paper we use EUROMOD, a tax-benefit micro-simulation model covering all EU member states, to investigate the size and distributional effects of tax allowances and tax credits in 6 European countries. We also investigate in detail which types of policy instruments have the most potential to redistribute towards the bottom and which are likely to be mostly benefitting households at the top of the income distribution. We examine both categorical targeting (i.e. eligibility rules that depend on some individual or household general characteristics) and explicit income targeting. We find that with a few exceptions the impact of tax allowances and tax credits on inequality is small. Tax credits are generally more progressive than tax allowances. However, with the exception of refundable tax credits, the design of the allowances/credits appears to be less important than the characteristics of the population they are targeting and/or other features of the income tax system in determining the redistributive effect. Consequently, tax concessions appear ill-suited to target resources towards households in the bottom part of the income distribution.