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Active Citizen's Income, Unconditional Income and Participation under Imperfect Competition: A Normative Analysis

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  • Van der Linden, Bruno

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES) ; Belgian National Fund for Scientific Research (FNRS))

Abstract

Various types of basic income schemes are considered to compensate the allocative inefficiencies induced by unemployment insurance systems. This paper develops a dynamic general equilibrium model of a unionized economy where participation to the labor market is endogenous and the budget of the State has to balance. It is shown that basic income schemes reduce the equilibrium unemployment rate. The normative analysis suggest that only the active population should be eligible to the basic income. Introducing an `active citizen's income' can be a Pareto-improving reform.

Suggested Citation

  • Van der Linden, Bruno, 1999. "Active Citizen's Income, Unconditional Income and Participation under Imperfect Competition: A Normative Analysis," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 1999023, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  • Handle: RePEc:ctl:louvir:1999023
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    File URL: http://sites.uclouvain.be/econ/DP/IRES/9923.pdf
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    References listed on IDEAS

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    1. Burda, Michael & Wyplosz, Charles, 1994. "Gross worker and job flows in Europe," European Economic Review, Elsevier, vol. 38(6), pages 1287-1315, June.
    2. L. F. M. Groot & H. M. M. Peeters, 1997. "A Model of Conditional and Unconditional Social Security in an Efficiency Wage Economy: The Economic Sustainability of a Basic Income," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 19(4), pages 573-597, July.
    3. 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.
    4. Pierre Cahuc & André Zylberberg, 1999. "Le modèle WS-PS," Annals of Economics and Statistics, GENES, issue 53, pages 1-30.
    5. Danthine, Jean-Pierre & Donaldson, John B., 1990. "Efficiency wages and the business cycle puzzle," European Economic Review, Elsevier, vol. 34(7), pages 1275-1301, November.
    6. 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.
    7. Layard, Richard & Nickell, Stephen & Jackman, Richard, 1991. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780198284345.
    8. Pissarides, Christopher A., 1998. "The impact of employment tax cuts on unemployment and wages; The role of unemployment benefits and tax structure," European Economic Review, Elsevier, vol. 42(1), pages 155-183, January.
    9. repec:adr:anecst:y:1999:i:53:p:01 is not listed on IDEAS
    10. Creedy, John, 1996. "Comparing Tax and Transfer Systems: Poverty, Inequality and Target Efficiency," Economica, London School of Economics and Political Science, vol. 63(250), pages 163-174, Suppl..
    11. Manning, Alan, 1993. "Wage Bargaining and the Phillips Curve: The Identification and Specification of Aggregate Wage Equations," Economic Journal, Royal Economic Society, vol. 103(416), pages 98-118, January.
    12. Lockwood, Ben & Manning, Alan, 1993. "Wage setting and the tax system theory and evidence for the United Kingdom," Journal of Public Economics, Elsevier, vol. 52(1), pages 1-29, August.
    13. KÉSENNE, Stefan, 1993. "The unemployment impact of a basic income," SESO Working Papers 1993012, University of Antwerp, Faculty of Applied Economics.
    14. Van der Linden, Bruno, 1997. "Basic income and unemployment in a unionized economy," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 1997014, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES), revised 10 Jul 1997.
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    16. Bowles, Samuel, 1992. "Is income security possible in a capitalist economy? : An agency-theoretic analysis of an unconditional income grant," European Journal of Political Economy, Elsevier, vol. 8(4), pages 557-578, December.
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    Cited by:

    1. 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.
    2. Brigitte van Baalen & Tobias Müller, 2005. "Social welfare effects of tax-benefit reform under endogenous participation and unemployment," Research Papers by the Institute of Economics and Econometrics, Geneva School of Economics and Management, University of Geneva 2005.03, Institut d'Economie et Econométrie, Université de Genève.
    3. Brigitte Baalen & Tobias Müller, 2014. "Social welfare effects of tax-benefit reform under endogenous participation and unemployment: an ordinal approach," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 21(2), pages 198-227, April.

    More about this item

    Keywords

    Basic income; wage bargaining; unemployment; participation; optimal taxation; ‘`WS-PS' model;

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy

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