Unconditional transfers under fiscal federalism: Distributional trade-offs in Switzerland

This article examines how Switzerland's decentralized welfare structure shapes the outcomes of Basic Income reforms. Using SWISSMOD, a static microsimulation model based on EUROMOD, we simulate unconditional transfer schemes of varying generosity at federal and cantonal levels, combined with alternative financing. Our results show that Basic Income reduces poverty and inequality across all scenarios, but effects differ by implementation level: federal schemes achieve stronger redistribution and uniformity, while cantonal schemes produce heterogeneous outcomes and maintain interregional disparities. Progressive taxation enhances equity but risks excessively high marginal rates; wealth taxation offers fiscal relief but does not automatically enhance poverty reduction or social protection in a decentralized setting. Thus, centralized implementation enhances uniformity and equity across regions, while decentralized administration preserves local differentiation but risks perpetuating spatial inequalities. These findings underscore the importance of aligning social policy design with fiscal federalism when considering unconditional transfers and equitable access to income security.