ELIE-minating poverty? Limits of the mechanism and potential improvements

Abstract

Using French data, we show that ELIE performs rather weakly when it comes to addressing the issue of poverty. Yet, eliminating poverty is also a valid normative property of any redistribution mechanism. We suggest combining ELIE with another redistributive solution aimed specifically at alleviating poverty: the personal allowance (PERAL) mechanism (Leroux, 2004 and 2007). We argue that ELIE and the PERAL mechanism, more than being compatible, are in fact complementary.