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Is ELIE a wasteful minimum income scheme?

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  • Erwin Ooghe
  • Erik Schokkaert

Abstract

ELIE can be interpreted as a minimum income scheme, financed by lump-sum taxes. It may induce social waste as individuals with a low taste for working may opt for voluntary unemployment. We simulate the magnitude of this social waste with microdata for Belgium and compare ELIE with a firstbest scheme and a second-best scheme (based on a linear income tax), implementing the same minimum income. As expected, the social waste induced by ELIE is intermediate between the social waste induced by the first- and second-best schemes. Assumptions about the preferences of the voluntarily unemployed play a crucial role.

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  • Erwin Ooghe & Erik Schokkaert, 2008. "Is ELIE a wasteful minimum income scheme?," Working Papers Department of Economics ces0805, KU Leuven, Faculty of Economics and Business, Department of Economics.
  • Handle: RePEc:ete:ceswps:ces0805
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    Cited by:

    1. Jean-Sébastien Gharbi & Yves Meinard, 2012. "Sur le sens du non welfarisme dans le modèle ELIE de redistribution des revenus de Kolm," AMSE Working Papers 1237, Aix-Marseille School of Economics, Marseille, France.

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