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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.

Suggested Citation

  • Thomas Moutos & William Scarth, 2003. "Some Macroeconomic Consequences of Basic Income and Employment Subsidies," CESifo Working Paper Series 916, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_916
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    File URL: http://www.cesifo-group.de/DocDL/cesifo_wp916.pdf
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    References listed on IDEAS

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    Cited by:

    1. 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.
    2. William Scarth & Lei Tang, 2007. "An Evaluation of the Working Income Tax Benefit," Quantitative Studies in Economics and Population Research Reports 424, McMaster University.
    3. William Scarth & Lei Tang, 2007. "An Evaluation of the Working Income Tax Benefit," Social and Economic Dimensions of an Aging Population Research Papers 220, McMaster University.

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    Keywords

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

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