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Keywords:Lump-sum Transfers 

Working Paper
Why Might Lump-sum Transfers Not Be a Good Idea?

We adopt an analytically tractable Aiyagari-type model to study the distinctive roles of unconditional lump-sum transfers and public debt in reducing consumption inequality due to uninsurable income risk. We show that in the absence of wealth inequality, using lump-sum transfers is not an optimal policy for reducing consumption inequality---because the Ramsey planner opts to rely solely on public debt to mitigate income risk without the need for lump-sum transfers. This result is surprising in light of the popularity of universal basic income advocated by many politicians and scholars.
Working Papers , Paper 2021-002

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Chen, Yunmin 1 items

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