Power, Responsibility and Social Policy: The Impact of Basic Income in a Competitive Experimental Labor Market

Veera Jokipalo and Katri Sieberg ()
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Veera Jokipalo: Tampere University
Katri Sieberg: Tampere University

A chapter in Power and Responsibility, 2023, pp 75-103 from Springer

Abstract: Abstract Is there a labor market policy that is efficient and also ‘fair’? This paper reports the results of an economic laboratory experiment designed to study the effect of Basic Income on labor market behavior. Earlier experimental contributions on the subject have found that a Basic Income may increase both wages and effort, which can be seen as increased responsible behavior. Our aim was to investigate whether these results are reproducible when the labor market is competitive. To this end, a modified gift exchange game with real effort and oversupply of labor was conducted under three conditions: a Basic Income (BI) treatment, an unemployment benefit (UB) treatment, and a control without any such benefits. Our results indicate that the impact of a BI policy on wages and effort can be nuanced. Overall, the wages were lower in the BI treatment than in the other treatments. In response to low wage offers, the reciprocity, in terms of effort levels, of subjects in the BI treatment was lower than those in the control group (with no unemployment benefits) but higher than those in the unemployment benefits treatment. At higher wage offers, effort was higher than that in the control group, but lower than in the unemployment benefit group. The BI policy had no effect on labor supply in our experiment.

Keywords: Universal basic income; Gift exchange; Effort comparisons; Wage comparisons (search for similar items in EconPapers)
JEL-codes: C7 C9 I38 J2 J3 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-031-23015-8_5

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DOI: 10.1007/978-3-031-23015-8_5

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