Universal Basic Income Programs

Working Paper 2021-582

Abstract

Using microsimulations this paper analyzes the poverty and tax implications of replacing current transfers and subsidies by a budget-neutral (no change in the fiscal deficit) universal basic income program (UBI) in Brazil, Chile, India, Russia, and South Africa. We consider three UBI transfers with increasing levels of generosity and identify scenarios in which the poor are no worse off than in the baseline scenario of existing social transfers. We find that for poverty levels not to increase under a UBI reform, the level of spending must increase substantially with respect to the baseline. Accordingly, the required increase in tax burdens is high throughout. In our five countries and scenarios, the least increase in taxes required to avoid poverty to be higher than in the baseline is around 25% (Brazil and Chile). Even at this lower rate, political resistance and efficiency costscould limit the feasibility of a UBI reform.

Authors: Ali Enami, Ugo Gentilini, Patricio Larroulet, Nora Lustig, Emma Monsalve, Siyu Quan, Jamele Rigolini.