Working Paper: NBER ID: w27351
Authors: Diego Daruich; Raquel Fernández
Abstract: Universal basic income (UBI) is an increasingly popular policy proposal but there is no evidence regarding its longer-term consequences. We study UBI in a general equilibrium model with imperfect capital markets, labor market shocks, and intergenerational linkages via skill formation and transfers. We find that UBI increases-welfare for older agents but has large-welfare losses for younger agents and future generations. A sizable share of the negative effects stem from the endogenous intergenerational linkages. Modeling automation as an increased probability of an “out-of-work” shock, the model provides insights on the changing welfare consequence of UBI in a riskier environment.
Keywords: No keywords provided
JEL Codes: H24; H31; I38; J24
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Universal Basic Income (UBI) (H53) | welfare for older agents (I38) |
| Universal Basic Income (UBI) (H53) | welfare for younger agents (I38) |
| increased distortionary taxation required to finance UBI (H31) | investments in skills and savings (D14) |
| investments in skills and savings (D14) | long-run GDP reduction (F69) |
| Universal Basic Income (UBI) (H53) | long-run GDP reduction (F69) |
| endogenous parental responses to UBI policy (J65) | steady-state welfare loss (D69) |