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Efficient Redistribution: Comparing Basic Income with Unemployment Benefits


  • FitzRoy, Felix

    () (University of St. Andrews)

  • Jin, Jim

    () (University of St. Andrews)


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.

Suggested Citation

  • FitzRoy, Felix & Jin, Jim, 2010. "Efficient Redistribution: Comparing Basic Income with Unemployment Benefits," IZA Discussion Papers 5236, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp5236

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    References listed on IDEAS

    1. N. Gregory Mankiw & Matthew Weinzierl & Danny Yagan, 2009. "Optimal Taxation in Theory and Practice," Journal of Economic Perspectives, American Economic Association, vol. 23(4), pages 147-174, Fall.
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    3. Chone, Philippe & Laroque, Guy, 2005. "Optimal incentives for labor force participation," Journal of Public Economics, Elsevier, vol. 89(2-3), pages 395-425, February.
    4. 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.
    5. Herwig Immervoll & Henrik Jacobsen Kleven & Claus Thustrup Kreiner & Emmanuel Saez, 2007. "Welfare reform in European countries: a microsimulation analysis," Economic Journal, Royal Economic Society, vol. 117(516), pages 1-44, January.
    6. Nada Eissa & Jeffrey B. Liebman, 1996. "Labor Supply Response to the Earned Income Tax Credit," The Quarterly Journal of Economics, Oxford University Press, vol. 111(2), pages 605-637.
    7. Richard W. Blundell, 1995. "The Impact of Taxation on Labour Force Participation and Labour Supply," OECD Jobs Study Working Papers 8, OECD Publishing.
    8. John F. Helliwell & Haifang Huang, 2010. "How's the Job? Well-Being and Social Capital in the Workplace," ILR Review, Cornell University, ILR School, vol. 63(2), pages 205-227, January.
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    Blog mentions

    As found by, the blog aggregator for Economics research:
    1. Basic income vs capitalism
      by chris dillow in Stumbling and Mumbling on 2013-07-02 18:34:26

    More about this item


    income distribution; basic income; unemployment benefits;

    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General

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