Macroeconomic Consequences of German Basic Income Proposals

Bachelor Thesis from the year 2014 in the subject Economics - Economic Cycle and Growth, grade: 1,0, University of Paderborn, language: English, abstract: Recently, the idea of implementing a basic income system in terms of negative income tax (NIT) or unconditional basic income (UBI) is considered as conceivable alternative to the status quo. The purpose of this thesis is to give an objective illustration of current German UBI proposals, especially concerning labour market effects and distributional consequences. Through economic key figures, I compare the depicted concepts in order to assess their suitability for the German case. What features does a UBI need to be “perfectly customised“? Actually, is it possible to achieve all ambitions or are there goals that cannot be accomplished simultaneously? With regard to the different objectives, which proposition is the best?The idea of basic income goes way back to 1943 when Lady Rhys-Williams firstly proposed a system that integrates taxation and social benefits. In the 1960s the Nobelist and famous economist, Milton Friedman carried on promoting the proposal of a NIT. Four field studies with a NIT, that were conducted in the United States between 1968 and 1982 showed that labour market participation only diminished slightly (Widerquist, 2005). Nevertheless, because every labour market is individual and depends on various features, numerous critics point to the unpredictability of labour market effects, especially on the supply side. Although Alaska, Brazil and Namibia recently introduced an UBI scheme, it still remains an unknown field from a practical perspective, which is why further theoretical considerations and simulations are requiered to develop a suitable concept for the German case.