The Role of Income Support Systems as Income Stabilizers in Times of Crisis

Mathias Dolls and Max Lay

No 52, EconPol Policy Brief from ifo Institute - Leibniz Institute for Economic Research at the University of Munich

Abstract: This Policy Brief examines how minimum income support (MIS) schemes contribute to the stabilization of disposable incomes in times of crisis in Europe. MIS systems act as a “safety net of last resort” in many European welfare states, but to varying degrees. The results from the simulation of stylized unemployment shocks hitting labor markets suggest that the tax-transfer system overall contributes to income stabilization in periods of crises. However, the MIS schemes’ individual contribution is relatively small, especially as set against the unemployment insurance system.

Date: 2023
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