The Welfare Effects of a Basic Income

Abstract

This paper analyzes the effects on welfare due to a Basic Income using a general equilibrium model with heterogeneous households. Therefore, starting from a benchmark model on public spending, a model for employed and unemployed households is drawn. Two scenarios are analyzed. The first one describes a setting where the basic income is paid to both kind of households without means testing. The second one presents a world where just unemployed households receive a basic income. The results on welfare are presented for both scenarios.