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Mechanics of Replacing Benefit Systems with a Basic Income: Comparative Results from a Microsimulation Approach

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  • Browne, James

    (OECD)

  • Immervoll, Herwig

    (OECD)

Abstract

Recent debates of basic income (BI) proposals shine a useful spotlight on the challenges that traditional forms of income support are increasingly facing, and highlight gaps in social provisions that largely depend on income or employment status. A universal "no questions asked" public transfer would be simple and have the advantage that no-one would be left without support. But an unconditional payment to everyone at meaningful but fiscally realistic levels would likely require tax rises as well as reductions in existing benefits. We develop a comprehensive BI scenario that facilitates an assessment of the resulting fiscal and distributional effects in a comparative context, undertake a microsimulation study to quantify them, and propose a simple decomposition to identify the mechanisms that drive effects in different country contexts. Results illustrate the challenges, but also the strengths, of existing social protection systems. A BI would fix benefit coverage gaps that exist in many countries, but would require very substantial tax rises if it were to be set at a meaningful level. As support would not be targeted on those most in need, it would not be a cost-effective way of directly reducing income poverty.

Suggested Citation

  • Browne, James & Immervoll, Herwig, 2017. "Mechanics of Replacing Benefit Systems with a Basic Income: Comparative Results from a Microsimulation Approach," IZA Discussion Papers 11192, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp11192
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    References listed on IDEAS

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    Cited by:

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    2. Ravallion, Martin, 2019. "Guaranteed employment or guaranteed income?," World Development, Elsevier, vol. 115(C), pages 209-221.
    3. Holly Sutherland, 2018. "Quality Assessment of Microsimulation Models The Case of EUROMOD," International Journal of Microsimulation, International Microsimulation Association, vol. 11(1), pages 198-223.
    4. Ali Enami & Ugo Gentilini & Patricio Larroulet & Nora Lustig & Emma Monsalve & Siyu Quan & Jamele Rigolini, 2021. "Universal Basic Income Programs: How Much Would Taxes Need to Rise? Evidence for Brazil, Chile, India, Russia, and South Africa," Working Papers 582, ECINEQ, Society for the Study of Economic Inequality.
    5. Martinelli, Luke & O'Neill, Kathryn, 2019. "A comparison of the fiscal and distributional effects of alternative basic income implementation modes across the EU28," EUROMOD Working Papers EM14/19, EUROMOD at the Institute for Social and Economic Research.
    6. René Böheim & Thomas Horvath & Thomas Leoni & Martin Spielauer, 2021. "The Impact of Health and Education on Labor Force Participation in Aging Societies – Projections for the United States and Germany from a Dynamic Microsimulation," NBER Working Papers 29534, National Bureau of Economic Research, Inc.
    7. Zoltan Csefalvay, 2019. "What are the policy options? A systematic review of policy responses to the impacts of robotisation and automation on the labour market," JRC Working Papers on Corporate R&D and Innovation 2019-02, Joint Research Centre (Seville site).
    8. Maura Francese & Delphine Prady, 2018. "Universal Basic Income: Debate and Impact Assessment," IMF Working Papers 2018/273, International Monetary Fund.
    9. Leventi, Chrysa & Pezer, Martina & Bezeredi, Slavko, 2018. "Research note: The distributional impact of local social benefits in Croatia," EUROMOD Working Papers EM17/18, EUROMOD at the Institute for Social and Economic Research.
    10. Matteo Richiardi, 2017. "Editorial," International Journal of Microsimulation, International Microsimulation Association, vol. 10(3), pages 1-4.
    11. Maurizio Bussolo & Maria E. Davalos & Vito Peragine & Ramya Sundaram, 2018. "Toward a New Social Contract," World Bank Publications - Books, The World Bank Group, number 30393, November.

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    More about this item

    Keywords

    basic income; targeting; individualisation; conditionality; microsimulation;
    All these keywords.

    JEL classification:

    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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