Five Crossroads on the Way to Basic Income: An Italian Tour

35 Pages Posted: 12 Apr 2014

See all articles by Ugo Colombino

Ugo Colombino

University of Turin - Department of Economics

Abstract

The current Italian income support policies are defective with respect to both efficiency and equity. A more effective design must face five crucial choices: universal vs. categorical policies; transfers vs. subsidies; unconditional vs. means-tested policies; coverage; flat vs. progressive tax rules. Using a microeconometric model and a social welfare methodology, we simulate the effects of 30 versions of three basic types: guaranteed minimum income, unconditional basic income and wage. The simulation preserves fiscal neutrality and adopts a methodology that allows for market equilibrium and ensures a consistent comparative statics interpretation of the results. The social welfare optimal policy is an unconditional transfer coupled with a wage subsidy, with a total benefit amounting to about 70% of the poverty level, or – depending on the social welfare criterion – a pure unconditional transfer amounting to 100% of the poverty level.

Keywords: income support mechanisms, basic income, guaranteed minimum income, wage subsidies, tax reform simulation

JEL Classification: H31, H21, C25

Suggested Citation

Colombino, Ugo, Five Crossroads on the Way to Basic Income: An Italian Tour. IZA Discussion Paper No. 8087. Available at SSRN: https://ssrn.com/abstract=2424186

Ugo Colombino (Contact Author)

University of Turin - Department of Economics ( email )

Via Po, 53
Torino, 10124
Italy

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