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  3. American Economic Review
  4. January 2024
  5. Universal Basic Income: A Dynamic Assessment

Universal Basic Income: A Dynamic Assessment

  • Diego Daruich
  • Raquel Fernández
American Economic Review
vol. 114, no. 1, January 2024
(pp. 38-88)
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Abstract

Universal basic income (UBI) is an increasingly popular policy proposal, but there is no evidence regarding its longer-term consequences. We find that UBI generates large welfare losses in a general equilibrium model with imperfect capital markets, labor market shocks, and intergenerational linkages via skill formation and transfers. This conclusion is robust to various alternative ways of financing UBI. By using observationally equivalent models that eliminate different sources of endogenous dynamic linkages (equilibrium capital market and parental investment in child skills), we show that the latter are largely responsible for the negative welfare consequences.

Citation

Daruich, Diego, and Raquel Fernández. 2024. "Universal Basic Income: A Dynamic Assessment." American Economic Review, 114 (1): 38-88. DOI: 10.1257/aer.20221099

Additional Materials

JEL Classification

  • H24 Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes
  • H31 Fiscal Policies and Behavior of Economic Agents: Household
  • I38 Welfare, Well-Being, and Poverty: Government Programs; Provision and Effects of Welfare Programs
  • J22 Time Allocation and Labor Supply
  • J24 Human Capital; Skills; Occupational Choice; Labor Productivity
  • J62 Job, Occupational, and Intergenerational Mobility; Promotion