Universal Basic Income: Inspecting the Mechanisms

Nir Jaimovich (), Itay Saporta-Eksten (), Ofer Setty and Yaniv Yedid-Levi
Additional contact information
Nir Jaimovich: University of Zurich
Itay Saporta-Eksten: Tel Aviv University

No 15058, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We consider the aggregate and distributional impact of Universal Basic Income (UBI). We develop a model to study a wide range of UBI programs and financing schemes and to highlight the key mechanisms behind their impact. The most crucial channel is the rise in distortionary taxation (required to fund UBI) on labor force participation. Second in importance is the decline in self-insurance due to the insurance UBI provides, resulting in lower aggregate capital. Third, UBI creates a positive income effect lowering labor force participation. Alternative tax-transfer schemes mitigate the impact on labor force participation and the cost of UBI.

Keywords: labor force participation; universal basic income; inequality (search for similar items in EconPapers)
JEL-codes: E2 E6 J08 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2022-02
New Economics Papers: this item is included in nep-dge, nep-ias, nep-lab, nep-mac and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Published - published online in: Review of Economics and Statistics , 2024

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