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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," CEPR Discussion Papers 10710, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:10710
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    References listed on IDEAS

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    1. Horstschräer, Julia & Clauss, Markus & Schnabel, Reinhold, 2010. "An unconditional basic income in the family context: Labor supply and distributional effects," ZEW Discussion Papers 10-091, ZEW - Leibniz Centre for European Economic Research.
    2. Casamatta, Georges & Cremer, Helmuth & Pestieau, Pierre, 2000. "Political sustainability and the design of social insurance," Journal of Public Economics, Elsevier, vol. 75(3), pages 341-364, March.
    3. Alice Fabre & Stéphane Pallage & Christian Zimmermann, 2014. "Universal Basic Income versus Unemployment Insurance," Cahiers de recherche 1427, CIRPEE.
    4. Besley, Timothy, 1990. "Means Testing versus Universal Provision in Poverty Alleviation Programmes," Economica, London School of Economics and Political Science, vol. 57(225), pages 119-129, February.
    5. J. Ignacio Conde-Ruiz & Paola Profeta, 2007. "The Redistributive Design of Social Security Systems," Economic Journal, Royal Economic Society, vol. 117(520), pages 686-712, April.
    6. Atkinson, A. B., 1996. "Public Economics in Action: The Basic Income/Flat Tax Proposal," OUP Catalogue, Oxford University Press, number 9780198292166.
    7. Galasso, Vincenzo & Profeta, Paola, 2007. "How does ageing affect the welfare state?," European Journal of Political Economy, Elsevier, vol. 23(2), pages 554-563, June.
    8. repec:cor:louvrp:-1449 is not listed on IDEAS
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    Cited by:

    1. 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.
    2. Hamamura, Jumpei & Kurita, Kenichi, 2021. "Does stigma against tax avoidance improve social welfare?," MPRA Paper 107173, University Library of Munich, Germany.
    3. 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.
    4. 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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    More about this item

    Keywords

    Basic income; Means testing; Political support;
    All these keywords.

    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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