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dc.contributor.authorRauh, C.
dc.contributor.authorSantos, M. R.
dc.date.accessioned2022-02-28T15:33:23Z
dc.date.available2022-02-28T15:33:23Z
dc.date.issued2022-01-31
dc.identifier.otherCWPE2208
dc.identifier.otherJIWP2205
dc.identifier.urihttps://www.repository.cam.ac.uk/handle/1810/334493
dc.description.abstractThis paper studies the impact of existing and universal transfer programs on vacancy creation, wages, and welfare using a search-and-matching model with heterogeneous agents and on-the-job human capital accumulation. We calibrate the general equilibrium model to match key moments concerning unemployment, wage and wealth distributions, as well as the distribution of EITC and transfers. In addition, unemployment insurance benefits are related to pre-unemployment earnings and subject to exhaustion, after which agents can only rely on transfers and savings. First, we show that existing transfers hamper economic activity but provide sizeable welfare gains. Next, we show that a universal basic income of nearly $12,500 to each household per year, which replaces all existing transfer programs and unemployment benefits, can lead to small aggregate welfare gains. These welfare gains mostly accrue to less skilled individuals despite their sizable fall in wages, and the overall rise in skill premia and wage inequality. Albeit the extra burden of higher taxes to finance UBI, we show that the increased action in hiring is a key channel though which outcomes for low education groups improve with the reform. However, if we keep the UI benefits in place, the positive effects on job creation vanish and UBI does not improve upon the current system.
dc.publisherFaculty of Economics, University of Cambridge
dc.relation.ispartofseriesCambridge Working Papers in Economics
dc.relation.ispartofseriesJaneway Institute Working Paper Series
dc.rightsAll Rights Reserved
dc.rights.urihttps://www.rioxx.net/licenses/all-rights-reserved/
dc.subjectTransfer programs
dc.subjectEITC
dc.subjectMeans-tested transfers
dc.subjectWelfare programs
dc.subjectLabor supply
dc.subjectOn-the-job human capital accumulation
dc.subjectLife cycle
dc.subjectInequality
dc.subjectUniversal basic income
dc.subjectUBI
dc.subjectUnemployment
dc.subjectGeneral equilibrium
dc.titleHow do transfers and universal basic income impact the labor market and inequality?
dc.typeWorking Paper
dc.identifier.doi10.17863/CAM.81911


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