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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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  1. Groot, L.F.M. & Peeters, H.M.M., 1997. "A model of conditional and unconditional social security in an efficiency wage economy: the economic sustainability of a basic income," MPRA Paper 23594, University Library of Munich, Germany.
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  17. 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.
  18. Sinn, Hans-Werner, 1994. "How Much Europe? Subsidiarity, Centralization and Fiscal Competition," Scottish Journal of Political Economy, Scottish Economic Society, vol. 41(1), pages 85-107, February.
  19. Heady, Christopher & Mitrakos, Theodore & Tsakloglou, Panos, 2001. "The Distributional Impact of Social Transfers in the European Union: Evidence from the ECHP," IZA Discussion Papers 356, Institute for the Study of Labor (IZA).
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