A General Equilibrium Model for Basic Income

Details

Supervisors

Davila Muro, Julio

Faculty

Faculté des sciences économiques, sociales, politiques et de communication

Degree label

Master [120] en sciences économiques, orientation générale

Abstract

This paper implements a general equilibrium model with heterogeneous agents to determine the impact of basic income on total welfare, defined as the sum of agents' utility. Firstly, a central planner solution is described. Afterwards, a decentralized solution where the government chooses only public expenditure and taxation is analyzed. Next, a subsidy s is assigned to agents who do not work. Finally, the introduction of basic income is discussed. All models are calibrated using aggregate EU15 data. The results show that while the conditional subsidy s improves total welfare with respect to the basic decentralized model, basic income does not. Moreover, basic income causes a non negligible reduction in working hours and economic output.