Is ELIE a wasteful minimum income scheme?
(2010) On Kolm’s Theory of Macrojustice. A Pluridisciplinary Forum of Exchange — ISBN: [978-3-540-78376-3], p. 235-255, published
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- Abstract
- ELIE can be interpreted as a minimum income scheme, financed by lump-sum taxes. While Kolm is careful in stating that his theory of macro-justice does not apply to individuals voluntarily working less than the "initial equal labour" k, we consider an extended scheme in which equal-labour income equalisation is also applied to these individuals. This extended ELIE may induce social waste as individuals with a low taste for working may opt for voluntary unemployment. We simulate the magnitude of this social waste with microdata for Belgium and compare extended ELIE with a first-best scheme and a second-best scheme (based on a linear income tax), implementing the same minimum income. The social waste induced by extended ELIE is intermediate between the social waste induced by the first-and second-best schemes, and remains relatively small for realistic levels of redistribution. Assumptions about the preferences of the voluntarily unemployed play a crucial role.
- Affiliations
Katholieke Universiteit Leuven Center for Economic Studies
Citations
Ooghe, E., & Schokkaert, E. (2010). Is ELIE a wasteful minimum income scheme? In Gamel, C. (ed.), On Kolm’s Theory of Macrojustice. A Pluridisciplinary Forum of Exchange (p. p. 235-255). Springer. https://doi.org/10.1007/978-3-540-78377-0_8