by Kate McFarland | Oct 3, 2016 | Research
The Government of Ontario plans to move forward with a pilot study of a basic income guarantee, to begin by April 2017.
On September 20, four researchers — Evelyn L. Forget (Professor of Economics at the University of Manitoba), Dylan Marando (PhD Student at the University of Toronto), Tonya Surman (founding CEO of the Centre for Social Innovation), and Michael Crawford Urban (Policy Associate at the Mowat Centre) — released a report called “Pilot Lessons: How to design a basic income pilot project for Ontario”. “Pilot Lessons” offers recommendations to the Ontario government on the basis of previous trials of basic income guarantee programs. It also calls for a greater focus on the impact of a guaranteed income on innovation and entrepreneurship.
The report begins by glossing the meaning of the term ‘basic income’ as it is used by the authors (“basic income is best conceptualized as a policy whereby a government guarantees, to all of its citizens, a regular predictable income sufficient to live a basic but dignified life”), distinguishing between the “demogrant” and “negative income tax” models.
The authors go on to overview past experiments on basic income, especially those conducted in the United States and Canada during the 1970s.
Based on this review of past experience, they identify four lessons:
1. Vary the parameters (e.g. eligibility conditions, amount of income guarantee, tax-back rates), but don’t vary them too much.
2. Communicate the results of experiments through scientific, not political, channels. The authors state that “science and politics don’t mix well”. For example, they point to the politically-driven promulgation of the alleged correlation between receipt of a basic income and increased divorce rates following the United States experiments in the 1970s. This contributed to the deterioration of interest in the policy, especially among Republicans.
3. Don’t overlook indirect benefits of basic income that might be observed in experiments. For example, the authors note Evelyn Forget’s investigation of Manitoba’s “Mincome” experiment: Forget demonstrated that the basic income guarantee in Dauphine corresponded to lower hospitalization rates and increased high school graduation rates.
4. Don’t assume that a decline in the time spent in paid employment implies a decline in the time spent in socially valuable work (e.g. consider whether the time is spent instead in childcare, continued education, volunteer work, etc).
In the next chapter, the authors describe major changes in the labor market that pose important differences between the present context and that of the past experiments, such as the increase in precarious labor and rise of automation. They also argue that, by decreasing the risk associated with leaving a job or starting a business, a basic income could facilitate entrepreneurship and innovation.
The report concludes with 14 recommendations for the design of a pilot study.
The full report is available for download.
Reviewed by Dawn Howard
Photo: Vancouver Science World CC BY 2.0 Franco Ng
by Tyler Prochazka | Aug 21, 2016 | Research
The Overseas Development Institute just released the largest meta-analysis of cash transfer programs ever, spanning 15 years of data and 165 studies. The main takeaway is that studies show a consistent reduction in poverty measures. Perhaps an even more important conclusion is that most evidence showed an increase in work participation after receiving the basic income.
The Overseas Development Institute is an independent think tank based in the United Kingdom. The meta-analysis reviewed tax and donor financed cash transfers to individuals and households. Retirement and unemployment were not included in the analysis. The studies had to meet “methodological rigor” to be included in the analysis.
Though these cash transfers differ somewhat from a pure basic income, the study provided the strongest evidence yet that a basic income-type approach is a crucial tool to eliminate poverty.
“There is strong evidence that cash transfers are associated with reductions in monetary poverty,” The report noted. “The evidence consistently showed an increase in total expenditure and food expenditure and a reduction in poverty measures.”
The few studies that did not find a statistically significant impact were possibly due to low transfer levels or because the transfer was only for limited time-frame, the report said.
One of the most heated disputes regarding the basic income is its effect on work participation. The report provided robust evidence that concerns about lowered work participation are unwarranted.
Most of the studies found no statistically significant effect on work participation, and those that found an effect largely found increased work participation and intensity.
Those studies that found decreased work were due to the elderly and individuals with dependents lowering their work participation. Several studies also found lower rates of child labor. As basic income advocates have said, this is likely a socially desirable effect.
Several other positive effects were found among the studies:
- Health service use and dietary diversity improved
- School attendance increased and several studies found positive effects on cognitive development test scores
- Women had greater decision-making power and less instances of physical abuse
- Savings and investment improved, improving recipients’ autonomy
The study has some caveats regarding the overall positive results. But the review said concerns regarding unintended negative effects are not supported by the evidence.
“The vast majority of studies reporting statistically significant results showed that cash transfers contribute to delivering the outcomes that policy-makers intend to achieve. This finding is particularly impressive given its consistency across the critical outcome areas and high number of indicators covered by this review,” the report said.
Jessica Hagen-Zanker, Francesca Bastagli, Luke Harman, Valentina Barca, Georgina Sturge and Tanja Schmidt, “Understanding the impact of cash transfers: the evidence”, Overseas Development Institute. July 2016.
by Kate McFarland | Aug 13, 2016 | Research
Bédia François Aka, a teacher at the Department of Economics at University of Bouaké, has written a journal article in which he investigates the implementation of a basic income in Côte d’Ivoire.
Abstract:
This paper tries to engage the economic and political debate around the proposition of a basic income grant (BIG) in Côte d’Ivoire. We simulate the economic wide and distributional impact of a universal basic income grant (BIG) in Cote d’Ivoire. How the BIG is financed is investigated. We use a microsimulated computable general equilibrium (CGE) model to analyze the effects of a universal basic income grant on the economy and on households. The model is performed using a Côte d’Ivoire’s 2003 social accounting matrix (SAM) based on the 1998 household survey composed of 4,200 households, and 2003 national accounts data. The paper uses a value added tax (VAT) financing approach to provide a reasonable feasible scenario, as we are all consumers. The results suggest that the macroeconomic impacts of the basic income grant are a powerful social protection tool in fighting poverty and inequality towards a welfare state.
The paper is available online as a free PDF file here.
Bedia François, “Quantitative Impacts Of Basic Income Grant On Income Distribution In Cote D’Ivoire: Time To Change Our Societies,” Revista Galega de Economía, Vol. 25-1 (2016).
Photo of women and girls of Côte d’Ivoire CC Krishna (2011)
by Kate McFarland | Aug 9, 2016 | Research
Johannes Haushofer and Jeremy Shapiro have published “The Short-Term Impact of Unconditional Cash Transfers to the Poor: Experimental Evidence from Kenya” in The Quarterly Journal of Economics. The article analyzes GiveDirectly‘s unconditional cash transfers to poor households in western Kenya, and examines their impact on consumption and psychological wellbeing.
Reporter Chris Weller summarized Haushofer and Shapiro’s findings in a column for Tech Insider.
Abstract of the original article:
We use a randomized controlled trial to study the response of poor households in rural Kenya to large, unconditional cash transfers from the NGO GiveDirectly. The transfers differ from other programs in that they are explicitly unconditional, large, and concentrated in time. We randomized at both the village and household levels; further, within the treatment group, we randomized recipient gender (wife vs. husband), transfer timing (lump-sum transfer vs. monthly installments), and transfer magnitude (USD 404 PPP vs. USD 1,525 PPP). We find a strong consumption response to transfers, with an increase in household monthly consumption from USD 158 PPP to USD 193 PPP nine months after the transfer began. Transfer recipients experience large increases in psychological wellbeing. We find no overall effect on levels of the stress hormone cortisol, although there are differences across some subgroups. Monthly transfers are more likely than lump-sum transfers to improve food security, while lump-sum transfers are more likely to be spent on durables, suggesting that households face savings and credit constraints. Together, these results suggest that unconditional cash transfers have significant impacts on economic outcomes and psychological wellbeing.
The article’s conclusion recaps some of the “significant impacts”:
We find that treatment households increased both consumption and savings (in the form of durable good purchases and investment in their self-employment activities). In particular, we observe increases in food expenditures and food security, but not spending on temptation goods. Households invest in livestock and durable assets (notably metal roofs), and we show that these investments lead to increases in revenue from agricultural and business activities, although we find no significant effect on profits at this short time horizon. We also observe no evidence of conflict resulting from the transfers; on the contrary, we report large increases in psychological wellbeing, and an increase in female empowerment with a large spillover effect on non-recipient households in treatment villages (p. 36).
Johannes Haushofer is a professor in the Department of Economics at Princeton University, as well as the founder and scientific director of the Busara Center for Behavioral Economics in Nairobi, Kenya. Jeremy Shapiro is the current president of the Busara Center; previously, he was a co-founder and director of GiveDirectly (from 2009-2012) and a consultant at McKinsey & Company.
The Quarterly Journal of Economics, edited at Harvard University’s Department of Economics, is the oldest professional journal of economics in the English language. It publishes articles in all areas of economics.
References
Johannes Haushofer and Jeremy Shapiro, “The Short-Term Impact of Unconditional Cash Transfers to the Poor: Experimental Evidence from Kenya,” The Quarterly Journal of Economics; published online July 19, 2016.
Chris Weller, “Here’s more evidence that giving people unconditional free money actually works,” Tech Insider; July 25, 2016.
Photo CC Ninara
by Kate McFarland | Jul 29, 2016 | Research
Vijay Joshi, Emeritus Professor of Economics at the University of Oxford, has recently published a new book, India’s Long Road: The Search for Prosperity, in which he argues in favor of a basic income for all citizens of India.
From the product description at Amazon.com:
Vijay Joshi argues that the foundations of rapid, durable and inclusive economic growth in India are distinctly shaky. He lays out a penetrating analysis of the country’s recent faltering performance, set against the backdrop of its political economy and charts the course it should follow to achieve widely shared prosperity.
Joshi argues that for India to realize its huge potential, the relation among the state, the market and the private sector must be comprehensively realigned. Deeper liberalization is very necessary but far from sufficient. The state needs to perform much more effectively many core tasks that belong squarely in its domain. His radical reform model includes a fiscally affordable scheme to provide a regular ‘basic income’ for all citizens that would speedily abolish extreme poverty.
Joshi’s research interests are in macroeconomics, international economics, and development economics. Outside of his appointment at Oxford, he has held various positions in government and business offices; for example, he has served as the Officer on Special Duty in India’s Ministry of Finance, the Director of J. P. Morgan’s Indian Investment Trust, an adviser to the Governor of the Reserve Bank of India, and a consultant to international organizations including the World Bank and the OECD.
Bibliographical entry:
Vijay Joshi, India’s Long Road: The Search for Prosperity, Oxford University Press, 2016.
Reviews focusing on Joshi’s support of basic income:
Ishan Bakshi, “Oxford’s Joshi proposes basic income for all,” Business Standard, July 19, 2016.
Jaimini Bhagwati, “Scrutinising India’s Economic Past Can Guide Us to a Brighter Future,” The Wire, July 20, 2016.
“Govt should wind up subsidies and provide basic income to everyone: Joshi,” WebIndia 123, July 15, 2016.
Photo credit: Chatham House (December 2012)
Thanks, as always, to my supporters on Patreon!
by Kate McFarland | Jul 16, 2016 | Research
Lithuania has received little attention in the global movement for universal basic income. In June of this year, however, Algimantas Laurinavičius and Antanas Laurinavičius, members of Faculty of Economics at Lithuania’s Vilnius University, published a brief investigation into the possibility of a UBI in Lithuania.
In general, the authors present a favorable view of basic income. In their conclusion, for example, they note, “Empirical research has proved that all the experimental basic income programmes decreased the level of poverty – the more generous the programme was, the stronger its effect was on the reduction of poverty” (p. 61).
This suggests that basic income could be a boon to Lithuania, which is “categorized as a country with high income inequality and high level of poverty risk.” Here, though, Laurinavičius and Laurinavičius are pessimistic — concluding that, at present, the Lithuania “state budget or social insurance fund budget are too small to pay-out sufficient benefits of basic income” (p. 62).
To read their full analysis (whether or not on the way to offer a second opinion on the Lithuanian situation), find the article below:
Algimantas Laurinavičius and Antanas Laurinavičius, “The Concept of Basic Income: Global Experience and Implementation Possibilities in Lithuania,” Business, Management, and Education, Vol. 14, No. 1; June 10, 2016.
Photo Lake Galve, Trakai, Lithuania CC Sek Keung Lo (flickr)
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