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Means testing versus basic income: The (lack of) political support for a universal allowance

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  • Cremer, Helmuth
  • Roeder, Kerstin

Abstract

This paper studies the political economy of a basic income (BI) versus a means tested welfare scheme. We show in a very simple setting that if society votes on the type of system, its generosity as well as the “severity” of means testing (if any), a BI system could only emerge in the political equilibrium under very strong and empirically implausible conditions. Instead, the political process leads to a means tested system. The necessity to draw political support does affect the design of the system, but it only implies that means testing becomes less severe so that benefits are extended also to the middle classes. However, a fully universal system is rejected by a majority.

Suggested Citation

  • Cremer, Helmuth & Roeder, Kerstin, 2015. "Means testing versus basic income: The (lack of) political support for a universal allowance," Economics Letters, Elsevier, vol. 136(C), pages 81-84.
    • Handle: RePEc:eee:ecolet:v:136:y:2015:i:c:p:81-84
    DOI: 10.1016/j.econlet.2015.09.003
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    References listed on IDEAS

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    1. Alice Fabre & Stéphane Pallage & Christian Zimmermann, 2014. "Universal Basic Income versus Unemployment Insurance," Cahiers de recherche 1427, CIRPEE.
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    Cited by:

    1. Gubello, Michele, 2024. "Social trust and the support for universal basic income," European Journal of Political Economy, Elsevier, vol. 81(C).
    2. Abhijit Banerjee & Paul Niehaus & Tavneet Suri, 2019. "Universal Basic Income in the Developing World," Annual Review of Economics, Annual Reviews, vol. 11(1), pages 959-983, August.
    3. Hamamura, Jumpei & Kurita, Kenichi, 2021. "Does stigma against tax avoidance improve social welfare?," MPRA Paper 107173, University Library of Munich, Germany.
    4. Amir, Rabah & FitzRoy, Felix & Jin, Jim, 2024. "A modest basic income can benefit a poor majority," Journal of Economic Behavior & Organization, Elsevier, vol. 224(C), pages 537-547.
    5. Alari Paulus, 2016. "The antipoverty performance of universal and means-tested benefits with costly take-up," ImPRovE Working Papers 16/12, Herman Deleeck Centre for Social Policy, University of Antwerp.
    6. Kurita, Kenichi, 2021. "Comparative institutional analysis of poverty-alleviation systems: Does basic income improve social welfare?," MPRA Paper 107177, University Library of Munich, Germany.

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    JEL classification:

    • D3 - Microeconomics - - Distribution
    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H5 - Public Economics - - National Government Expenditures and Related Policies

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