Rethinking the Welfare State

Nezih Guner, Remzi Kaygusuz () and Gustavo Ventura ()
Additional contact information
Remzi Kaygusuz: Sabancy University, https://www.sabanciuniv.edu/en
Gustavo Ventura: Arizona State University, https://www.asu.edu/

Working Papers from CEMFI

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. Yet, most households support eliminating current transfers since 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, there are transfer levels and associated tax rates that improve upon the current system. Providing per-person transfers to all households is quite costly, and reducing tax distortions helps to provide for additional resources to expand redistribution.

Keywords: Taxes and transfers; household labor supply; income risk; negative income tax. (search for similar items in EconPapers)
JEL-codes: E62 H24 H31 (search for similar items in EconPapers)
Date: 2021-07
New Economics Papers: this item is included in nep-cwa, nep-dge, nep-ltv, nep-mac and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
https://www.cemfi.es/ftp/wp/2107.pdf (application/pdf)

Related works:
Journal Article: Rethinking the Welfare State (2023)
Working Paper: 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 (2019)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cmf:wpaper:wp2021_2107

Access Statistics for this paper

More papers in Working Papers from CEMFI Contact information at EDIRC.
Bibliographic data for series maintained by Araceli Requerey ().