The paper evaluates a possible scheme for a new universal child allowance (assegno unico e universale per i figli, AUU), aimed at favouring low and medium income households (equity) without increasing their financial disincentives to work (efficiency). The AUU assumed in this paper decreases with respect to the ISEE (Equivalent Economic Situation Indicator) and features an in-work benefit. The analysis is based on the Banca d'Italia tax-benefit microsimulation model, BIMic.
The AUU assumed in this work would lead to a substantial decrease of inequality and absolute poverty, especially for minors. This result reflects the relevant budgetary cost of the measure and the marked progressive profile assumed in the paper. Moreover, the in-work benefit would limit the financial disincentives to work, especially within households characterized by low-to-middle ISEE. Therefore, the assumed AUU strikes a good balance in the equity-efficiency trade-off.
