First, we employ a methodology that decomposes the change in poverty into changes due to the means and variances of market and transfer incomes and to other factors which affect the shape of the income distribution. We then briefly describe the Reagan economic programme. Finally, we estimate a regression model that reflects changes in these moments of the income distribution to changes in the unemployment rates and to the Reagan programme. The regression estimates, together with the poverty rate decomposition, allow us to show that the administration's cuts in income-transfer programmes account for about 40 per cent of the recent rise in poverty and that increased unemployment accounts for about a third of the increase in poverty.

In this paper, we analyse the impact of government policies on income distribution and poverty in Switzerland. First, we give an overview of the Swiss welfare system and provide an estimate of the poverty problem in this country. Second, we discuss some major problems of fiscal incidence analysis. Third, we examine the impact of taxes and expenditures on income distribution in Switzerland using a budget incidence approach. The analysis is based mainly on the first nationwide representative Income and Wealth Survey 1980 conducted by the authors. The major findings are the following:

1 The government budget, including the social security system, has a significant redistributive effect which is due mainly to expenditures rather than to taxation.

2 Direct taxes reduce income inequality, measured by the Gini coefficient; indirect taxes increase it. The net effect of all taxes is to reduce income inequality.

3 The redistributive effect of social welfare expenditures is larger than that of other government expenditures.

The large and generous income transfer system in the Netherlands has caused increasing tax burdens and deficits in a period of sluggish economic growth. Confronted with this situation, the present Dutch government is trying to cut back the scope of the system substantially by reducing benefit levels. The distributional impact of this policy is simulated on a micro data set. It is found that the effects of the transfer cuts on overall income distribution are not very large: from 1983 to 1986, inequality as measured by the Gini or the Theil index increases by 3 per cent. However, inequality between working and non-working people as measured by the Theil index between groups is simulated to increase by as much as 50 per cent. On the other hand, people can be hypothesized to increase their work effort when benefit levels are lowered. Using a behavioural model, it is estimated that from 1983 to 1986 the working population might increase, ceteris paribus, by 0.5 per cent yearly as a consequence of the transfer cuts. This would imply second-round distributional effects mitigating the increase in overall inequality by one-third.