Removing Welfare Traps: Employment Responses in the Finnish Basic Income Experiment
- (pp. 501-22)
Abstract
This paper provides evidence that replacing minimum unemployment benefits with a basic income of equal size has minor employment effects at best. We examine an experiment in Finland in which 2,000 benefit recipients were randomized to receive a monthly basic income. The experiment lowered participation tax rates by 23 percentage points for full-time employment. Despite the considerable increase in work incentives, days in employment remained statistically unchanged in the first year of the experiment. Moreover, even though all job search requirements were waived, participation in reemployment services remained high.Citation
Verho, Jouko, Kari Hämäläinen, and Ohto Kanninen. 2022. "Removing Welfare Traps: Employment Responses in the Finnish Basic Income Experiment." American Economic Journal: Economic Policy, 14 (1): 501-22. DOI: 10.1257/pol.20200143Additional Materials
JEL Classification
- C93 Field Experiments
- H24 Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes
- H53 National Government Expenditures and Welfare Programs
- I38 Welfare, Well-Being, and Poverty: Government Programs; Provision and Effects of Welfare Programs
- J64 Unemployment: Models, Duration, Incidence, and Job Search
- J65 Unemployment Insurance; Severance Pay; Plant Closings
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