Fighting Child Poverty in Spain by Moving Towards European Standards: A Microsimulation-Based Case Study

Poverty in Spain is widespread among children, and its incidence has recently shown a strong upward trend. The aim of this paper is twofold: to assess the impact of the Spanish tax and benefit system on current child poverty rates and, in that context, to simulate the potential distributive consequences of implementing a variety of family transfer schemes using an EU-wide static microsimulation tool (EUROMOD). We simulate and study the effects of choosing different policies: a redesign of the current means-tested child benefit in terms of amount and age distribution, a reform of the existing income tax relief making it refundable and the addition of a taxable Universal Child Benefit (UCB) to the system. Our results indicate that several of the proposed reforms could generate substantial reductions in child poverty.