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Alternative Basic Income Mechanisms: An Evaluation Exercise With a Microeconometric Model

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Author Info

  • Colombino Ugo

    (University of Torino and Collegio Carlo Alberto)

  • Locatelli Marilena

    (University of Torino)

  • Narazani Edlira

    (University of Torino)

  • O'Donoghue Cathal

    (Rural Economy Research Centre)

Abstract

We develop and estimate a microeconometric model of household labour supply in four European countries with differing economies and welfare policy regimes: Denmark, Italy, Portugal and the United Kingdom. We then simulate, under the constraint of constant total net-tax revenue (fiscal neutrality), the effects of various hypothetical tax-transfer-reform basic-income policies: Guaranteed Minimum Income, Work Fare, Participation Basic Income and Universal Basic Income. We produce indexes and criteria by which the reforms can be ranked and compared to current tax-transfer systems. The exercise can be considered as one of empirical optimal taxation, where the optimization problem is solved computationally rather than analytically. Many versions of basic income policies would be superior to the current system, and the most successful are not means-tested (Universal or Participation Basic Income) and adopt progressive tax rules. If constraints other than fiscal neutrality are considered, such as the implied top marginal tax rate or the effect on female labour supply, the picture changes: unconditional policies remain optimal and feasible in Denmark and the United Kingdom; while in Italy and Portugal universal policies appear instead to be too costly in implied top marginal tax rates and adverse effects on female participation – conditional policies such as Work Fare emerge as more desirable there.

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Bibliographic Info

Article provided by De Gruyter in its journal Basic Income Studies.

Volume (Year): 5 (2010)
Issue (Month): 1 (September)
Pages: 1-31

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Handle: RePEc:bpj:bistud:v:5:y:2010:i:1:n:3

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References

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  1. Immervoll, Herwig & Kleven, Henrik Jacobsen & Kreiner, Claus Thustrup & Saez, Emmanuel, 2005. "Welfare Reform in European Countries: A Microsimulation Analysis," IZA Discussion Papers 1810, Institute for the Study of Labor (IZA).
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  3. Ricardo Varsano & Kevin Kim & Michael Keen, 2006. "The "Flat Tax(es)"," IMF Working Papers 06/218, International Monetary Fund.
  4. Ugo Colombino & R. Aaberge & T. Wennemo, 2006. "Evaluating Alternative Representations of the Choice Sets in Models of Labour Supply," CHILD Working Papers wp17_06, CHILD - Centre for Household, Income, Labour and Demographic economics - ITALY.
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  12. Aaberge, Rolf & Colombino, Ugo, 2006. "Designing Optimal Taxes with a Microeconometric Model of Household Labour Supply," IZA Discussion Papers 2468, Institute for the Study of Labor (IZA).
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  16. Aaberge, Rolf & Colombino, Ugo & Strom, Steinar, 1999. "Labour Supply in Italy: An Empirical Analysis of Joint Household Decisions, with Taxes and Quantity Constraints," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 14(4), pages 403-22, July-Aug..
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Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Basic income vs capitalism
    by chris dillow in Stumbling and Mumbling on 2013-07-02 13:34:26
  2. Why not a basic income?
    by chris dillow in Stumbling and Mumbling on 2013-10-16 11:50:15
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Cited by:
  1. Colombino, Ugo, 2014. "Five Crossroads on the Way to Basic Income: An Italian Tour," IZA Discussion Papers 8087, Institute for the Study of Labor (IZA).
  2. M. Fort & N. Schneeweis & R. Winter-Ebmer, 2011. "More Schooling, More Children: Compulsory Schooling Reforms and Fertility in Europe," Working Papers wp787, Dipartimento Scienze Economiche, Universita' di Bologna.
  3. Colombino, Ugo, 2012. "Equilibrium Simulation with Microeconometric Models: A New Procedure with an Application to Income Support Policies," IZA Discussion Papers 6679, Institute for the Study of Labor (IZA).
  4. Rolf Aaberge & Ugo Colombino, 2011. "Empirical Optimal Income Taxation: A Microeconometric Application to Norway," CHILD Working Papers wp16_11, CHILD - Centre for Household, Income, Labour and Demographic economics - ITALY.
  5. repec:ese:emodwp:em10-13 is not listed on IDEAS
  6. Colombino Ugo, 2011. "Designing a universal income support mechanism for Italy.An exploratory tour," Department of Economics and Statistics Cognetti de Martiis. Working Papers 201112, University of Turin.
  7. Colombino, Ugo & Narazani, Edlira, 2012. "What's Best for Women: Gender Based Taxation, Wage Subsidies or Basic Income?," IZA Discussion Papers 6828, Institute for the Study of Labor (IZA).
  8. repec:ese:emodwp:em8-13 is not listed on IDEAS
  9. Edlira Narazani, 2011. "Evidences on Household Labour Supply when Labour Demand is not Perfectly Elastic Keywords: Labour Supply, Labour Demand, Equilibrium," CHILD Working Papers wp22_11, CHILD - Centre for Household, Income, Labour and Demographic economics - ITALY.
  10. Ugo Colombino, 2011. "Five issues in the design of income support mechanisms. The case of Italy," CHILD Working Papers wp21_11, CHILD - Centre for Household, Income, Labour and Demographic economics - ITALY.
  11. Holly Sutherland & Francesco Figari, 2013. "EUROMOD: the European Union tax-benefit microsimulation model," International Journal of Microsimulation, Interational Microsimulation Association, vol. 1(6), pages 4-26.
  12. repec:ese:emodwp:em5-12 is not listed on IDEAS
  13. Ugo Colombine, 2013. "A new equilibrium simulation procedure with discrete choice models," International Journal of Microsimulation, Interational Microsimulation Association, vol. 6(3), pages 25-49.
  14. Colombino Ugo, 2012. "A microeconometric-computational approach to empirical optimal taxation: outline of a project," Department of Economics and Statistics Cognetti de Martiis. Working Papers 201218, University of Turin.
  15. Colombino, Ugo & Narazani, Edlira, 2014. "Closing the Gender Gap: Gender Based Taxation, Wage Subsidies or Basic Income?," Department of Economics and Statistics Cognetti de Martiis. Working Papers 201412, University of Turin.

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