Template-Type: ReDIF-Paper 1.0
Series: Tinbergen Institute Discussion Papers
Creation-Date: 2026-08-18
Number: 26-058/VII
Author-Name: Robert Dur
Author-Workplace-Name: Erasmus University Rotterdam
Author-Name: Anja Schöttner
Author-Workplace-Name: Humboldt-Universität zu Berlin
Title: An Allocative Efficiency Rationale for a Universal Basic Income
Abstract: This paper shows that allocative efficiency may entail high income tax revenues and a basic income. We consider an economy where people consume three types of goods: market goods, public goods, and social goods. The latter are non-priced goods with positive externalities that are produced by citizens in their leisure time. We show that in the absence of income taxes, work hours are too high and social-goods production is too low as compared to the socially optimal levels. We characterize optimal income taxation and develop a set of testable predictions. One implication of the model is that, as wages grow over time, at some point a basic income becomes part of the optimal policy under economically plausible conditions.
Classification-JEL: D61, D62, H21, H23,H24
Keywords: Allocative efficiency, Basic income, Income taxation, Social goods, Civil society
File-URL: https://papers.tinbergen.nl/26058.pdf
File-Format: application/pdf
File-Size: 595.327 bytes
Handle: RePEc:tin:wpaper:20260058