Rethinking the Welfare State

Gustavo Ventura, Remzi Kaygusuz and Nezih Guner

No 1386, Working Papers from Barcelona School of Economics

Abstract: The U.S. spends non trivially on non-medical transfers for its working-age population in a wide range of programs that support low and middle-income households. How valuable are these programs for U.S. households? Are there simpler, welfare-improving ways to transfer resources that are supported by a majority? What are the macroeconomic effects of such alternatives? We answer these questions in an equilibrium, life-cycle model with single and married households who face idiosyncratic productivity risk, in the presence of costly children and potential skill losses of females associated with non-participation. Our findings show that a potential revenue-neutral elimination of the welfare state generates large welfare losses in the aggregate, although most households support the move as losses are concentrated among a small group. We find that a Universal Basic Income program does not improve upon the current system. If instead per-person transfers are implemented alongside a proportional tax, a Negative Income Tax experiment, it becomes feasible to improve upon the current system. Providing per-person transfers to all households is costly, and reducing tax distortions helps providing for resources to expand redistribution.

Keywords: Social Insurance; household labor supply; income risk; taxes and transfers; universal basic income (search for similar items in EconPapers)
JEL-codes: E62 H24 H31 (search for similar items in EconPapers)
Date: 2023-03
New Economics Papers: this item is included in nep-dge and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Related works:
Journal Article: Rethinking the Welfare State (2023)
Working Paper: Rethinking the Welfare State (2023)
Working Paper: Rethinking the Welfare State (2021)
Working Paper: Rethinking the Welfare State (2021)
Working Paper: Rethinking the Welfare State (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:bge:wpaper:1386

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