DP13635 Universal Basic Income: Some Theoretical Aspects

Author(s): Maitreesh Ghatak, Francois Maniquet
Publication Date: March 2019
Date Revised: April 2019
Keyword(s): Labour Supply, unconditional cash transfers, universal basic income, welfare policies
JEL(s): D31, D63, H24, H31, I38
Programme Areas: Public Economics, Development Economics, Macroeconomics and Growth
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=13635

In this paper, we review possible theoretical justifications of a universal basic income (UBI) scheme and also examine the determinants of its feasibility and scope. We begin by contrasting the unconditionality of UBI with the many conditions that typically accompany other welfare policies. Possible justifications for an unconditional UBI range from pure normative reasons to practical reasons due to the problem of screening beneficiaries and imperfections in institutions in charge of implementing tax and welfare policies. We also explore theoretically the conditions that determine the feasibility and size of a UBI. The broad picture that emerges from our review is that both normative and practical considerations make UBI easier to defend as a tool of poverty alleviation in poor economies than a tool to achieve social justice in rich ones.