Universal Basic Income versus Unemployment Insurance

Alice Fabre, Stephane Pallage and Christian Zimmermann

No 2014-47, Working Papers from Federal Reserve Bank of St. Louis

Abstract: In this paper we compare the welfare effects of unemployment insurance (UI) with an universal basic income (UBI) system in an economy with idiosyncratic shocks to employment. Both policies provide a safety net in the face of idiosyncratic shocks. While the unemployment insurance program should do a better job at protecting the unemployed, it suffers from moral hazard and substantial monitoring costs, which may threaten its usefulness. The universal basic income, which is simpler to manage and immune to moral hazard, may represent an interesting alternative in this context. We work within a dynamic equilibrium model with savings calibrated to the United States for 1990 and 2011, and provide results that show that UI beats UBI for insurance purposes because it is better targeted towards those in need.

Keywords: Universal basic income; Idiosyncratic shocks; Unemployment insurance; Heterogeneous agents; Moral hazard (search for similar items in EconPapers)
JEL-codes: D7 E24 J65 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2014-11-14
New Economics Papers: this item is included in nep-dge, nep-ias and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://research.stlouisfed.org/wp/2014/2014-047.pdf Full text (application/pdf)

Related works:
Working Paper: Universal Basic Income versus Unemployment Insurance (2014)
Working Paper: Universal Basic Income versus Unemployment Insurance (2014)
Working Paper: Universal Basic Income versus Unemployment Insurance (2014)
Working Paper: Universal Basic Income versus Unemployment Insurance (2014)
Working Paper: Universal Basic Income versus Unemployment Insurance (2014)
Working Paper: Universal Basic Income versus Unemployment Insurance (2014)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedlwp:2014-047

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Working Papers from Federal Reserve Bank of St. Louis Contact information at EDIRC.
Bibliographic data for series maintained by Anna Oates ().