@article {10.34196/ijm.00277,
article_type = {journal},
title = {Tax and Benefit Policies to Reduce Poverty in the Netherlands: A Microsimulation Analysis},
author = {Goderis, Benedikt and Vlekke, Marente},
volume = 16,
number = 1,
year = 2023,
month = {apr},
pub_date = {2023-04-30},
pages = {108-133},
citation = {IJM 2023;16(1):108-133},
doi = {10.34196/ijm.00277},
url = {https://doi.org/10.34196/ijm.00277},
abstract = {With around a million people – or 6\% of the population – living below the threshold, poverty remains a tenacious problem in the Netherlands. It is especially prevalent among children, migrants and the very elderly. Planned policies, if implemented, will cause poverty to rise by 28\% over the next decades, everything else equal. We use two microsimulation models to estimate the effects of various tax-benefit policies and four larger reforms on poverty. To estimate the costs of implementing these policies and reforms, we also document their effects on employment, income inequality and the government budget. The results indicate that reducing poverty is possible but involves considerable costs in terms of public money and/or jobs. Introducing a budget-neutral universal basic income at the level of the state pension reduces poverty by 60\% but requires very high income tax rates and reduces employment by 8\%. Other policy options are cheaper but generate smaller reductions in poverty. These findings demonstrate the social trilemma faced by policymakers in modern welfare states: to simultaneously provide adequate minimum income support, maintain sufficient financial incentives for people to find a job, ánd keep the government budget in check. This has become increasingly difficult due to slow wage growth at the bottom of the earnings distribution. However, we also find important differences in cost efficiency. Of the policies with a budgetary impact of 1 billion euros, increasing minimum income support achieves the largest reduction in poverty. Raising the means-tested child budget is a relatively efficient way of reducing child poverty.},
keywords = {poverty, social assistance, taxes, benefits, microsimulation, basic income, negative income tax, minimum income support},
journal = {IJM},
issn = {1747-5864},
publisher = {International Journal of Microsimulation},
}