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Means Testing versus Basic Income: The (Lack of) Political Support for a Universal Allowance

Listed author(s):
  • Cremer, Helmuth

    ()

    (Toulouse School of Economics)

  • Roeder, Kerstin

    ()

    (University of Augsburg)

This paper studies the political economy of a basic income (BI) versus a means tested welfare scheme. We show in a very simple setting that if society votes on the type of system, its generosity as well as the "severity" of means testing (if any), a BI system could only emerge in the political equilibrium under very strong and empirically implausible conditions. Instead, the political process leads to a means tested system. The necessity to draw political support does affect the design of the system, but it only implies that means testing becomes less severe so that benefits are extended also to the middle classes. However, a fully universal system is rejected by a majority.

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File URL: http://ftp.iza.org/dp9191.pdf
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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 9191.

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Length: 14 pages
Date of creation: Jul 2015
Publication status: published in: Economics Letters, 2015, 136, 81-84
Handle: RePEc:iza:izadps:dp9191
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  1. Alice Fabre & Stéphane Pallage & Christian Zimmermann, 2014. "Universal Basic Income versus Unemployment Insurance," Cahiers de recherche 1427, CIRPEE.
  2. J. Ignacio Conde-Ruiz & Paola Profeta, 2007. "The Redistributive Design of Social Security Systems," Economic Journal, Royal Economic Society, vol. 117(520), pages 686-712, April.
  3. Atkinson, A. B., 1996. "Public Economics in Action: The Basic Income/Flat Tax Proposal," OUP Catalogue, Oxford University Press, number 9780198292166.
  4. Galasso, Vincenzo & Profeta, Paola, 2007. "How does ageing affect the welfare state?," European Journal of Political Economy, Elsevier, vol. 23(2), pages 554-563, June.
  5. Casamatta, Georges & Cremer, Helmuth & Pestieau, Pierre, 2000. "Political sustainability and the design of social insurance," Journal of Public Economics, Elsevier, vol. 75(3), pages 341-364, March.
  6. Horstschräer, Julia & Clauss, Markus & Schnabel, Reinhold, 2010. "An unconditional basic income in the family context: Labor supply and distributional effects," ZEW Discussion Papers 10-091, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  7. Besley, Timothy, 1990. "Means Testing versus Universal Provision in Poverty Alleviation Programmes," Economica, London School of Economics and Political Science, vol. 57(225), pages 119-129, February.
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