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Efficient Redistribution: Comparing Basic Income with Unemployment Benefits

  • FitzRoy, Felix


    (University of St. Andrews)

  • Jin, Jim


    (University of St. Andrews)

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    We compare two systems of income redistribution: unemployment benefits (UB) and basic income (BI). First, for a simple utility function, with both intensive and extensive margins, the unemployed are likely better off with pure BI than pure UB, regardless of labour supply elasticity and wage distribution. Then we allow a general utility function and ignore intensive margins. For given unemployment, lowering UB and raising BI always benefits the unemployed, raises utilitarian welfare and benefits a poor majority. Reducing unemployment and UB simultaneously can benefit a majority of the employed as well as all unemployed, again for any wage distribution.

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    Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 5236.

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    Length: 25 pages
    Date of creation: Oct 2010
    Date of revision:
    Handle: RePEc:iza:izadps:dp5236
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