Is ELIE a wasteful minimum income scheme?

Erwin Ooghe () and Erik Schokkaert

Center for Economic Studies - Discussion papers from Katholieke Universiteit Leuven, Centrum voor Economische Studiën

Abstract: ELIE can be interpreted as a minimum income scheme, financed by lump-sum taxes. It may induce social waste as individuals with a low taste for working may opt for voluntary unemployment. We simulate the magnitude of this social waste with microdata for Belgium and compare ELIE with a firstbest scheme and a second-best scheme (based on a linear income tax), implementing the same minimum income. As expected, the social waste induced by ELIE is intermediate between the social waste induced by the first- and second-best schemes. Assumptions about the preferences of the voluntarily unemployed play a crucial role.

Date: 2008-03
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Working Paper: Is ELIE a wasteful minimum income scheme? (2008)
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Persistent link: http://EconPapers.repec.org/RePEc:ete:ceswps:ces0805

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