Abstract
The potential economic effects of implementing a Basic Income Guarantee (BIG) in the United States are examined using a small-scale computable general equilibrium model in which labor and saving are the fundamental household decision variables. The social choice variables consist of BIG (termed herein “guaranteed minimum consumption”) and public good expenditure. Assuming the model’s benchmark values for the social choice variables are a reasonable approximation to the current situation, solution for the optimal social choice variables suggests that a much larger BIG would be preferable from a social welfare standpoint. This basic result is relatively insensitive to alterations in the model’s parameters. However, there would be such a substantial reduction in aggregate output and saving from moving to the optimal position that the political feasibility of any such policy shift is doubtful, regardless of any indications from economic analysis.
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