## Guaranteed Minimum Income Schemes in Europe: Landscape and Design

_IMF Working Papers, July 2, 2021_

## Source details

**Canonical URL:** [Guaranteed Minimum Income Schemes in Europe: Landscape and Design](https://www.imf.org/en/publications/wp/issues/2021/07/02/guaranteed-minimum-income-schemes-in-europe-landscape-and-design-461341)

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## Bibliographic details
- Authors: David Coady, Samir Jahan, Baoping Shang, Riki Matsumoto
- Published: July 2, 2021
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781513584379.001

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### Overview
- Provides an overview of the design of means-tested Guaranteed Minimum Income (GMI) schemes in European countries.
- Focuses on how key design features differ across countries and how countries balance:
  - The primary objective of poverty alleviation.
  - Managing work disincentives inherent in such programs.
  - Containing fiscal cost.

### Key findings
- Analysis finds a clear trade-off between poverty alleviation and employment incentives in practice.
- Many countries combine low generosity with low benefit withdrawal rates (BWRs), thereby prioritizing employment incentives over poverty alleviation.
- Many countries can reduce this trade-off by combining higher generosity with higher BWRs.
- Countries with very high BWRs should consider reducing these to lessen work disincentives.
- Work disincentives associated with higher BWRs can be attenuated by strengthening complementary activation policies.

### Policy recommendations and design options
- Consider allowing income disregards to reduce effective BWRs and improve work incentives.
- Consider time dependent (rather than income-dependent) benefit withdrawal to reduce work disincentives.
- Strengthen complementary activation policies that incentivize and support participation in the labor market.
- Combine higher benefit generosity with appropriate BWRs and activation measures to reduce the trade-off between poverty alleviation and employment incentives.

### Subjects and keywords
- Subjects: Employment, Income, Labor, Labor markets, National accounts, Tax allowances, Taxes, Wages
- Keywords: activation policy, benefit generosity, Employment, Europe, GMI scheme, Guaranteed Minimum Income scheme, Income, Labor disincentive, Labor markets, Tax allowances, Wages, work disincentive

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_Source: https://www.imf.org/en/publications/wp/issues/2021/07/02/guaranteed-minimum-income-schemes-in-europe-landscape-and-design-461341_