Is funding a large universal basic income feasible? A quantitative analysis of UBI with endogenous labour supply

Maitreesh Ghatak and Xavier Jaravel

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: This article addresses a key point of contention in the ongoing UBI debate: given the way labour supply responds to tax changes, is it possible to fund a large UBI using income taxes? Using recent empirical estimates and quantitative tools from the public economics literature, we assess what level of UBI may be funded given the fall in labour supply that could be induced by the required larger taxes. Despite a prevalent belief that a large UBI would be fiscally irresponsible, we find that it is possible to fund a large annual UBI over £11,000 per person, that it could be funded through a 45% flat tax, but that increasing taxes on the most affluent alone would be insufficient. Our findings highlight an important tension: a large UBI is possible, but it requires large tax rates, including for those at the bottom of the income distribution.

Keywords: poverty; inequality; redistribution; taxation; welfare (search for similar items in EconPapers)
JEL-codes: E6 J01 N0 R14 (search for similar items in EconPapers)
Pages: 11 pages
Date: 2020-12-07
New Economics Papers: this item is included in nep-mac and nep-pbe
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Citations: View citations in EconPapers (3)

Published in LSE Public Policy Review, 7, December, 2020, 1(2). ISSN: 2633-4046

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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:108533

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