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EICT Microsimulations: Public Policy Initiatives for Mexico to Tackle Poverty

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This paper estimates a Heckman correction equation to perform simulations of an earned income tax credit (EITC) program for single mothers, using an income and expenditure household survey to assess the poverty reduction. The results show that poverty decreases at least four percentage points more with this program than with the current cash transfer program “PROSPERA”, and at 20% of the cost. In addition an income tax credit program fosters women formal employment by 10.8% and increase government revenue, concluding that this could be a better strategy for tackling extreme poverty in a sustainable way, and at lower public cost.

Image: © IRD - Santini William