Based on the Bank of Italy's microsimulation model (BIMic), the paper quantifies the short-term impact of replacing the minimum income scheme (RdC) with a new inclusion allowance, the 'assegno di inclusione' (AdI) on households' disposable income, inequality, poverty, and on monetary disincentives to labour supply.
The number of households who can apply for the AdI falls compared with the RdC because of the more stringent eligibility criteria. Holding constant the distribution of market incomes and labour force participation, the AdI leads to a reduction in absolute poverty and income inequality but less so than the RdC did. At the same time, the lower coverage of the new scheme mitigates monetary disincentives to search for jobs and this could stimulate labour supply, a behavioural nature factor that the BIMic cannot estimate.
