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Some Macroeconomic Consequences of Basic Income and Employment Subsidies

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  • Thomas Moutos
  • William Scarth

Abstract

Two macro models – one for a closed economy and the other for a small open economy – are used to examine the scope for income redistribution and employment creation. In particular, the introduction of both a guaranteed annual income (basic income) and an employment subsidy are examined, and these policies are compared to a straightforward tax cut for (unskilled) labour. All initiatives are financed by a tax on capital. In the open-economy setting, capital is perfectly mobile, so there is a trade-off between the direct benefits of each policy, and the costs that follow from the out-migration of capital. The model is used to assess the relative importance of these competing effects.

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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 916.

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Date of creation: 2003
Date of revision:
Handle: RePEc:ces:ceswps:_916

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Keywords: guaranteed annual income; subsidies; capital taxes; redistribution.;

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References

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  1. Eissa, Nada & Hoynes, Hilary Williamson, 1999. "The Earned Income Tax Credit and the Labor Supply of Married Couples," Department of Economics, Working Paper Series, Department of Economics, Institute for Business and Economic Research, UC Berkeley qt1024b9z8, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  2. Christopher A. Pissarides, 1997. "The Impact of Employment Tax Cuts on Unemployment and Wages: The Role of Unemployment Benefits and Tax Structure," CEP Discussion Papers dp0361, Centre for Economic Performance, LSE.
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  9. Stephen Machin & John Van Reenen, 1998. "Technology And Changes In Skill Structure: Evidence From Seven Oecd Countries," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 113(4), pages 1215-1244, November.
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  11. A. B. Atkinson, 1999. "The Economic Consequences of Rolling Back the Welfare State," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262011719, December.
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  13. Sinn, Hans-Werner, 1994. "How much Europe? Subsidiarity, centralization and fiscal competition," Munich Reprints in Economics, University of Munich, Department of Economics 19838, University of Munich, Department of Economics.
  14. Sinn, Hans-Werner, 1995. " A Theory of the Welfare State," Scandinavian Journal of Economics, Wiley Blackwell, Wiley Blackwell, vol. 97(4), pages 495-526, December.
  15. Richard Blundell & Thomas MaCurdy, 1998. "Labour supply: a review of alternative approaches," IFS Working Papers, Institute for Fiscal Studies W98/18, Institute for Fiscal Studies.
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  17. Gary Burtless, 1986. "The work response to a guaranteed income: a survey of experimental evidence," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 30, pages 22-59.
  18. Van der Linden, Bruno, 1998. "Fighting unemployment without worsening povety: Basic income versus reductions of social security contributions," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 1999028, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES), revised 00 Oct 1999.
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  20. L. F. M. Groot & H. M. M. Peeters, 1997. "A Model of Conditional and Unconditional Social Security in an Efficiency Wage Economy: The Economic Sustainability of a Basic Income," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 19(4), pages 573-597, July.
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  25. repec:fth:simfra:00-11 is not listed on IDEAS
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Cited by:
  1. William Scarth & Lei Tang, 2007. "An Evaluation of the Working Income Tax Benefit," Quantitative Studies in Economics and Population Research Reports, McMaster University 424, McMaster University.
  2. William Scarth & Lei Tang, 2007. "An Evaluation of the Working Income Tax Benefit," Social and Economic Dimensions of an Aging Population Research Papers, McMaster University 220, McMaster University.
  3. William Scarth & Lei Tang, 2008. "An Evaluation of the Working Income Tax Benefit," Canadian Public Policy, University of Toronto Press, vol. 34(1), pages 25-36, March.

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