Arbeitspapier

Relative income, redistribution and well-being

In a model with heterogeneous workers and both intensive and extensive margins of employment, we consider two systems of redistribution: a universal basic income, and a categorical unemployment benefit. Well-being depends on own-consumption relative to average employed workers' consumption, and concern for relativity is a parameter that affects model outcomes. While labour supply incurs positive marginal disutility, we allow negative welfare effects of unemployment. We also compare Rawlsian and utilitarian welfare in general equilibrium under the polar opposite transfer systems, with varying concern for relativity. Basic income Pareto dominates categorical benefits with moderate concern for relativity in both cases.

Language
Englisch

Bibliographic citation
Series: IZA Discussion Papers ; No. 5241

Classification
Wirtschaft
Taxation, Subsidies, and Revenue: General
Market Structure, Pricing, and Design: General
Subject
relative income
redistribution
basic income
unemployment benefits
happiness
well-being

Event
Geistige Schöpfung
(who)
FitzRoy, Felix
Nolan, Michael
Event
Veröffentlichung
(who)
Institute for the Study of Labor (IZA)
(where)
Bonn
(when)
2010

Handle
Last update
10.03.2025, 11:43 AM CET

Data provider

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Object type

  • Arbeitspapier

Associated

  • FitzRoy, Felix
  • Nolan, Michael
  • Institute for the Study of Labor (IZA)

Time of origin

  • 2010

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