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Five Crossroads on the Way to Basic Income: An Italian Tour

  • Colombino, Ugo

    ()

    (University of Turin)

The current Italian income support policies are defective with respect to both efficiency and equity. A more effective design must face five crucial choices: universal vs. categorical policies; transfers vs. subsidies; unconditional vs. means-tested policies; coverage; flat vs. progressive tax rules. Using a microeconometric model and a social welfare methodology, we simulate the effects of 30 versions of three basic types: guaranteed minimum income, unconditional basic income and wage. The simulation preserves fiscal neutrality and adopts a methodology that allows for market equilibrium and ensures a consistent comparative statics interpretation of the results. The social welfare optimal policy is an unconditional transfer coupled with a wage subsidy, with a total benefit amounting to about 70% of the poverty level, or – depending on the social welfare criterion – a pure unconditional transfer amounting to 100% of the poverty level.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 8087.

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Length: 35 pages
Date of creation: Mar 2014
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Handle: RePEc:iza:izadps:dp8087
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