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Is funding a large universal basic income feasible? A quantitative analysis of UBI with endogenous labour supply

Ghatak, Maitreesh and Jaravel, Xavier (2020) Is funding a large universal basic income feasible? A quantitative analysis of UBI with endogenous labour supply. LSE Public Policy Review, 1 (2). ISSN 2633-4046

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Identification Number: 10.31389/lseppr.9

Abstract

This article addresses a key point of contention in the ongoing UBI debate: given the way labour supply responds to tax changes, is it possible to fund a large UBI using income taxes? Using recent empirical estimates and quantitative tools from the public economics literature, we assess what level of UBI may be funded given the fall in labour supply that could be induced by the required larger taxes. Despite a prevalent belief that a large UBI would be fiscally irresponsible, we find that it is possible to fund a large annual UBI over £11,000 per person, that it could be funded through a 45% flat tax, but that increasing taxes on the most affluent alone would be insufficient. Our findings highlight an important tension: a large UBI is possible, but it requires large tax rates, including for those at the bottom of the income distribution.

Item Type: Article
Official URL: https://ppr.lse.ac.uk/
Additional Information: © 2020 CC-BY The Author
Divisions: Economics
Subjects: H Social Sciences > HD Industries. Land use. Labor
H Social Sciences > HJ Public Finance
H Social Sciences > HC Economic History and Conditions
Date Deposited: 22 Jan 2021 14:57
Last Modified: 02 May 2021 23:17
URI: http://eprints.lse.ac.uk/id/eprint/108533

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