International Monetary Fund article on Citizen’s Basic Income

The International Monetary Fund has published an article, What is Universal Basic Income? by Maura Francese and Delphine Prady.

… Empirical analysis can shed light on the relative redistributive performance of existing social safety nets, a universal basic income, and potential alternatives. Given that both the spending and the tax side of the budget shape distributional outcomes, a comprehensive analysis should evaluate both to ensure progressivity—that is, gradually increasing net burden on more affluent households and larger benefits for more vulnerable households. Such an analysis must also consider fiscal sustainability. Typically, policymakers face trade-offs along the following key dimensions:

Coverage at the bottom of the income distribution versus leakage to richer households

Generosity of transfers versus incentives and economic distortions, such as those related to the decision to enter the labor market and the number of hours worked

Fiscal cost versus alternative use of scarce fiscal resources

Policymakers must also consider a fourth aspect: how to reconcile objectives and implementation challenges, such as the government’s capacity to raise resources equitably and sustainably and roll out a complex transfer program.

Scholars disagree on whether a universal basic income is more appropriate for countries with limited and ill-functioning safety nets or for rich countries that can afford it. Limited administrative capacity argues for a shift toward more universal transfer programs in developing economies. But displacement of other priorities (such as education and health) where revenue mobilization is problematic—particularly in the short term—is a concern.

In advanced economies, universal basic income is often used as an instrument to address inadequate safety nets (and ensure inclusion) and a way to tackle the challenges of technological and demographic changes. Country authorities must assess the relative merits of universal basic income including its financing through rechanneling resources already used in other ways or through higher taxes and contributions.

To read the article, click here.