The impact of a 'minimum guaranteed income program' in Portugal.
Public Finance and Management › Vol. 2 Nbr. 2, March 2002
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Summary
Portuguese Minimum Guaranteed Income Program
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The impact of a 'minimum guaranteed income program' in Portugal.
Abstract
The purpose of this paper is to estimate the impact of the Portuguese Minimum Guaranteed Income Program (RMIG) on the distribution of household incomes, poverty, and the size of government expenditures necessary to finance the program. The baseline adopted is constructed under the assumption of no behavioural responses to the transfer mechanism and of total participation of all eligible households. The Program has small but positive impacts both in reducing inequality and on the poverty rate for individuals. These gains are almost cancelled when labour supply reactions are taken into account. However, the most important consequences of the RMIG are sharp gains in the measures of poverty severity and intensity. In these dimensions, taking into account the labour supply incentives of the RMIG does not reduce substantially the positive impacts of the Program. Introduction In 1996 the Portuguese government began experiments with localised introductions of a Minimum Guaranteed Income Program (RMIG) in Portugal. After that experimental stage the RMIG had its official beginning as a means-tested universal access program in late 1997. The main objective of this paper is to present a first study of the RMIG effects. We estimate its impact on the distribution of household incomes and welfare as well as the size of government expenditures necessary to finance the program. The analysis is carried out in four stages. In the first stage we use the 1995 Household Budgets Survey (HBS95) to establish a baseline. Initially we operationalize basic concepts such as the definition of total household income, earnings, income from capital, and government transfers. We also have to establish appropriate equivalence scales. Finally, we estimate a central case poverty line, as well as a few alternatives to this central case. Once thes...See the full content of this document
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