New SSE Riga/BICEPS occasional paper by Anna Pluta (BICEPS) and Anna Zasova (BICEPS).
Abstract. In this note, we evaluate the distributional effects of the minimum income reform and the tax reform, which are implemented in Latvia starting 2018. Our analysis is focused on estimating the expected changes in income inequality and poverty rates, which the reforms will induce. We use tax-benefit microsimulation model EUROMOD andanationally representative data on income EU-SILC. Our results suggest that even though both the minimum income reform and the tax reform help achieving some reduction in income inequality and poverty, none of the reforms will be very effective in resolving the problem of weak work incentives and high tax wedge for low income earners.