Fighting unemployment without worsening povety: Basic income versus reductions of social security contributions

Bruno Van der Linden

No 1999028, LIDAM Discussion Papers IRES from Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES)

Abstract: Reductions of social security contributions (RSSC) and a basic income (BI) (or the related Negative Income Tax) are considered in a dynamic general equilibrium framework with imperfect competition on the labour market (the ‘wage-setting/price-setting’ model). The cases with homogeneous and heterogeneous workers are considered. It turns out that both policies have a long-run effect on the unemployment rate if they are appropriately designed. With two types of skills, this proposition holds if relative wages are rigid and if the supply of skills is not perfectly elastic. A welfare analysis shows that introducing appropriately framed RSSC or BI can be a Pareto improvement.

Keywords: basic income; taxation; payroll taxes; social insurance; wage bargaining; equilibrium unemployment (search for similar items in EconPapers)
JEL-codes: H2 H3 J32 J38 J58 (search for similar items in EconPapers)
Pages: 29
Date: 1998-11-01, Revised 1999-10
New Economics Papers: this item is included in nep-lab and nep-pbe
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:ctl:louvir:1999028

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