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The Impact of a “Minimum Guaranteed Income Program” in Portugal

Author: MIGUEL GOUVEIA AND CARLOS FARINHA RODRIGUES
Published in PFM, Vol. 2 No. 2

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.

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