Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/339429 
Year of Publication: 
2025
Series/Report no.: 
EUROMOD Working Paper No. EM 07/25
Publisher: 
University of Essex, Institute for Social and Economic Research (ISER), Colchester
Abstract: 
The Spanish Minimum Income scheme, introduced in 2020, offers beneficiaries a unique national guaranteed income as a last-resort benefit. However, the scheme's design featured a lack of work incentives for low earners, potentially leading to inactivity traps. To address this flaw the Spanish government introduced an earnings disregard in 2022, enabling beneficiaries to keep all or part of the benefit when their earnings increase up to a certain limit. This paper provides an ex ante assessment of this reform, looking into its expected fiscal, distributional and labour market effects using the tax-benefit microsimulation model EUROMOD, and the behavioural labour supply model EUROLAB. Our results show that the reform has the potential to incentivise work for very low earners, particularly lone parents, mainly by promoting part-time employment. The reform and its subsequent employment effects are also expected to slightly reduce inequality and poverty. While this is a step in the right direction, we discuss some avenues for improvement.
Subjects: 
Minimum income schemes
work incentives
tax-benefit microsimulation
EUROMOD
EUROLAB
JEL: 
H31
I38
J22
C63
Document Type: 
Working Paper

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