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Some Macroeconomic Consequences of Basic Income and Employment Subsidies

  • Thomas Moutos
  • William Scarth

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

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