Evaluating alternative basic income mechanisms : a simulation for European countries

We develop and estimate a microeconometric model of household labour supply in five European countries representative of different economies and welfare policy regimes: Denmark, Italy, Norway, Portugal and United Kingdom. We then simulate, under the constraint of constant total net tax revenue, the effects of various hypothetical tax-transfer reforms which include alternative versions of a Basic Income mechanisms. We produce various indexes and criteria according to which the reforms can be ranked. The exercise can be considered as one of empirical optimal taxation, where the optimization problem is solved computationally rather than analytically.This work is part of a CHILD project financed by Compagnia di San Paolo (“Minimum Guaranteed Income: A Crucial Node in the Design of Social Policy in Europe”, 2006-8) and by the Italian Ministry of University and Research (“Modelli econometrici per la valutazione dei programmi di reddito minimo garantito”, 2007-8)