An Allocative Efficiency Rationale for a Universal Basic Income

Robert Dur and Anja Schöttner
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Anja Schöttner: Humboldt-Universität zu Berlin

No 26-058/VII, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: This paper shows that allocative efficiency may entail high income tax revenues and a basic income. We consider an economy where people consume three types of goods: market goods, public goods, and social goods. The latter are non-priced goods with positive externalities that are produced by citizens in their leisure time. We show that in the absence of income taxes, work hours are too high and social-goods production is too low as compared to the socially optimal levels. We characterize optimal income taxation and develop a set of testable predictions. One implication of the model is that, as wages grow over time, at some point a basic income becomes part of the optimal policy under economically plausible conditions.

Keywords: Allocative efficiency; Basic income; Income taxation; Social goods; Civil society (search for similar items in EconPapers)
JEL-codes: D61 D62 H21 H23 H24 (search for similar items in EconPapers)
Date: 2026-08-18
New Economics Papers: this item is included in nep-pbe and nep-pub
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Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:20260058

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