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Unconditional Basic Income and Welfare State Reform in Representative Democracies

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Empirical Research on an Unconditional Basic Income in Europe

Part of the book series: Contributions to Economics ((CE))

Abstract

An increase in income and wealth inequality does not only have negative social and economic consequences, it is also a threat to the functioning of our democracies. The debate on the introduction of an Unconditional Basic Income (UBI) is beset with unanswered questions, with conjectures and unproven beliefs that call for additional research by economists and a uniform definition. The current distribution-and-income-based national welfare state could be transformed into a ‘prosperity state’, in which the economy is designed around delivering the capabilities for human flourishing. The introduction of a UBI, funded by progressive consumption and wealth taxes, should be on the research agenda of economics, and on the policy agenda in representative democracies. It has the potential to enlarge the economic pie, and to improve the distribution of income, for it reflects the contribution to society. Empirics on UBI are limited. Moreover, research is mainly focussed on short-term labour market effects, poverty and income inequality reduction, and there is some attention for health and well-being. However, the long-term effect on the environment are fully disregarded. The aim of this book is to scrutinise and comment on some of the main issues of the basic income, to contribute to the knowledge basis on the basic income, and to support better informed—evidence-based—policy making, and to bring a better world about.

“Even though the market is socially embedded in its organization, it is thus not socially embedded in its outcomes.” B. van Bavel (2016) The invisible hand? How market economies have emerged and declined since AD 500, Oxford: Oxford University Press: 266.

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Notes

  1. 1.

    For updates on all existing UBI experiments and basic income policy proposals from around the world, see the Basic Income News service of the Basic Income Earth Network (BIEN) (https://basicincome.org/news/).

  2. 2.

    Basic income experiments in developing countries are outside the focus of this volume. In the developing world, the interest in basic income mirrors a policy shift in e.g. the World Bank and in developing countries to bundle the various subsidies and targeted transfers into a lump-sum cash transfer to households (Banerjee, Niehaus, & Suri, 2019; Hanna and Olken, 2018). Recent basic income experiments were in India (2010–2011), Namibia (2008/2009–2012), Kenya (2011–2013), Uganda (2017–2019) and Brazil (2018–) (Downes & Lansley, 2018; Haushofer & Shapiro, 2016, 2018). In Iran (2011–) a nation-wide unconditional cash-transfer replaced energy subsidies to distribute natural wealth (Salehi-Isfahani & Mostafavi-Dehzooei, 2018).

  3. 3.

    According to US estimates, the administrative costs of means-testing benefits are four or five times higher than the amount of non-means-tested transfers, such as a UBI (Colombino, 2019).

  4. 4.

    Van Bavel (2016) analyses the rise and downfall of three market economies: early medieval Iraq, high/late medieval Italy, and the late medieval/early modern Low Countries, and then draws parallels to England and the US in recent times.

  5. 5.

    In 1990 Margret Thatcher introduced a head tax. It became one of the factors that led to the end of her premiership in the same year, and it was repealed in 1991 by her successor.

  6. 6.

    When market forces can explain the compensation of CEO’s externalities are zero. The skyrocketing executive pay can be explained by bargaining power: low marginal tax rates encourage executives to negotiate harder for higher pay; and have little to do with managerial productivity (Piketty et al., 2014).

  7. 7.

    Consumption tax rates start low and rise more steeply than the current income tax . A top marginal rate of 100% encourages savings and investments. It also reduces income inequality and cures slow growth (Frank, 2011).

  8. 8.

    The 1982 Alaska Permanent Fund Dividend has a long duration. The large-scale dividend has served as an important ‘automatic stabiliser’ for the entire economy of Alaska. It has a positive effect on the birth rate . The reduction of the cost of children (price effect) may be smaller or bigger than the income effect, i.e. value of time also increases with income. Since raising children is a time-consuming activity, the birth rate could fall because of the dividend (Goldsmith, 2010). The Alaska dividend has also had a significant positive effect on the birth weight (Chung et al., 2016). In the US, the NIT treatment increased also the birth weights and decreased the fertility (Marinescu, 2018).

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Delsen, L. (2019). Unconditional Basic Income and Welfare State Reform in Representative Democracies. In: Delsen, L. (eds) Empirical Research on an Unconditional Basic Income in Europe. Contributions to Economics. Springer, Cham. https://doi.org/10.1007/978-3-030-30044-9_1

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