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Working Paper
The Macroeconomic Effects of Universal Basic Income Programs
What are the consequences of a nationwide reform of a transfer system based on means-testing toward one of unconditional transfers? I answer this question with a quantitative model to assess the general equilibrium, inequality, and welfare effects of substituting the current US income security system with a universal basic income (UBI) policy. To do so, I develop an overlapping generations model with idiosyncratic income risk that incorporates intensive and extensive margins of the labor supply, on-the-job learning, and child-bearing costs. The tax-transfer system closely mimics the US ...
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 Paper
Are Unconditional Lump-sum Transfers a Good Idea?
The role of unconditional lump-sum transfers in improving social welfare in heterogenous agent models has not been thoroughly understood in the literature. We adopt an analytically tractable Aiyagari-type model to study the distinctive role of unconditional lump-sum transfers in reducing consumption inequality due to ex-post uninsurable income risk under borrowing constraints. Our results show that in the presence of ex-post heterogeneity and in the absence of wealth inequality, unconditional lump-sum transfers are not a desirable tool for reducing consumption inequality—the Ramsey planner ...
Working Paper
Are Unconditional Lump-sum Transfers a Good Idea?
The role of unconditional lump-sum transfers in improving social welfare in heterogenous agent models has not been thoroughly understood in the literature. We adopt an analytically tractable Aiyagari-type model to study the distinctive role of unconditional lump-sum transfers in reducing consumption inequality due to ex-post uninsurable income risk. Our results show that in the presence of ex-post heterogeneity and in the absence of wealth inequality, unconditional lump-sum transfers are not a desirable tool for reducing consumption inequality—the Ramsey planner opts to rely solely on ...