A critical review of the literature on UBI experiments

Skeyi, Sanele

A critical review of the literature on UBI experiments

Thesis / Dissertation

2024

Abstract

A universally guaranteed basic income is said to be a disarmingly simple idea that could help solve the problems associated with economic insecurity. However, sceptics about this idea argue that it is too simple and that despite best intentions, could have adverse results. These possible adverse results include spreading the welfare revenue too widely and too thinly to have a meaningful effect on the poor who need it the most; demotivating people from working, thus expanding poverty and welfare traps and rendering the transfer unsustainable. While politicians and policymakers have been arguing about the merits of this idea, economists and other social scientists have run experiments to help them understand the mechanisms of responses to a guaranteed income and to be able to advise policymakers. While these experiments have been reviewed separately in the literature, they have not been collated and analysed jointly in a systematic manner. These experiments have mostly been in the form of field experiments which have focused on testing the effects of the two main models of delivering a guaranteed income, that is a Negative Income Tax (NIT) and a Universal Basic Income (UBI). While guaranteed income experiments span over half a century and across the world, in both developed and developing countries, only a handful of these meet the criteria of being universal, unconditional, periodic, individual cash transfers. In this paper, we have sampled experiments that either fully met these criteria or fell at least one element short. We critically evaluate how they were designed, carried out, the inferences drawn from the observations they generated, and the validity of those inferences. The experiments reviewed show that a UBI is efficient at reducing exclusion errors; improving welfare outcomes such as poverty, education, and health; and has a gender equalising effect both in households and in the labour market. However, the findings on the effects of a UBI on economic inequality still need further testing. The studies also show that contrary to expectations, a guaranteed income does not incentivise people to choose more leisure, instead they spend more time in education and training, take up care work or pursue entrepreneurial opportunities. We then recommend some aspects of a UBI that require further testing. These include funding mechanisms, the optimum amount and tenure of the guaranteed income, and the consumption behaviour of poor UBI recipients. Lastly, we recommend design imperatives and methodologies for future experimentation. While most of the experiments have been carried out in the field, we make a case for the use of lab experiments to better study the mechanisms of a guaranteed income.

Keywords

Economics

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