Abstract

Abstract This paper aims to investigate the effects of the introduction of an active welfare state measure in France, the Revenu de Solidarité Active, which replaced the old system of social minima. By using a micro–macro simulation model, we characterize the effects on households’ disposable income, labor supply, wages, GDP, public deficit, and other micro and macroeconomic aspects. Our findings suggest that although increasing public expenditure, the reform largely repays its cost by reducing involuntary unemployment, increasing labor supply and private consumption and thus improves GDP and the deficit/GDP ratio. If the great recession did not occur, poverty and inequality would have been significantly reduced by the RSA reform. JEL codes: I38, C63, C68, J22, H31

Highlights

  • In this paper we aim to study the micro and macroeconomic implications of the implementation of an active welfare state reform in France, the Revenu de Solidarité Active (RSA)

  • To this aim we use SYSIFF 2006, a micro–macro simulation model for the French fiscal system based on the 2006 Budget de Familles survey data, a nationally representative household budget data survey collected in France every five years

  • It is worth noting that RSA is clearly appealing with respect to Revenu Minimum d’Insertion (RMI) as an active welfare state measure because its implicit marginal tax rate is lower, 38% respect to 50%, or 100% of RMI and Allocation Parent Isolé (API) depending on the work situation

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Summary

Introduction

In this paper we aim to study the micro and macroeconomic implications of the implementation of an active welfare state reform in France, the Revenu de Solidarité Active (RSA). The idea of RSA is to unify the two pre-existing public transfers (RMI and API) into a single measure which provides beneficiaries with a minimum set of resources and will constitute an incentive for people to exit unemployment and find a new job as an income complement.

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