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

Author

Listed:
  • Cremer, Helmuth

    () (Toulouse School of Economics)

  • Roeder, Kerstin

    () (University of Augsburg)

Abstract

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.

Suggested Citation

  • Cremer, Helmuth & Roeder, Kerstin, 2015. "Means Testing versus Basic Income: The (Lack of) Political Support for a Universal Allowance," IZA Discussion Papers 9191, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp9191
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    References listed on IDEAS

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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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    Cited by:

    1. Alari Paulus, 2016. "The antipoverty performance of universal and means-tested benefits with costly take-up," ImPRovE Working Papers 16/12, Herman Deleeck Centre for Social Policy, University of Antwerp.

    More about this item

    Keywords

    political support; means testing; basic income;

    JEL classification:

    • D3 - Microeconomics - - Distribution
    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H5 - Public Economics - - National Government Expenditures and Related Policies

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