An ex ante evaluation of the Revenu de Solidarité Active by micro-macro simulation techniques

This paper aims to investigate the effects of the introduction of an active welfare state measure, the Revenu de Solidarité Active (RSA), in France. The RSA replaced the old system of social minima, comprised by RMI and API. By using a micro-macro simulation model we characterize the effects on households’ disposable income, labour supply, wages, GDP, deficit, and other micro and macroeconomic aspects. We find that, although increasing public expenditure, RSA largely repays its cost by reducing involuntary unemployment, increasing labour supply and private consumption, and thus improving GDP and the deficit/GDP ratio. Poverty and inequality are also reduced significantly.