Universal Basic Income in Developing Countries: Pitfalls and Alternatives

dc.contributor.authorFerreira, Pedro Cavalcanti
dc.contributor.authorPeruffo, Marcel Cortes
dc.contributor.authorCordeiro Valério, André
dc.contributor.unidadefgvEscolas::EPGEpor
dc.date.accessioned2021-02-24T18:20:51Z
dc.date.available2021-02-24T18:20:51Z
dc.date.issued2021-02-23
dc.description.abstractThis article studies the short -and long-term effects of Universal Basic Income programs - a uniform transfer to every individual in society - in the context of a developing economy and compares this policy with other schemes that condition the transfer on household characteristics such as income and education. We construct a dynastic heterogeneous-agent model, featuring uninsurable idiosyncratic risk, investment in physical and human capital, and choice of labor effort. We calibrate the model to Brazilian data and introduce a UBI transfer equivalent to roughly 4.5% of average household income. We find that, over the short run, this policy alleviates poverty and increases welfare, especially for the poor. Over time, however, income falls and poverty and inequality increase as fewer people stay in school, labor supply decreases, and savings fall. We then explore the consequences of an equivalent transfer that is both subject to means testing and requires recipients to enroll their children in school. This policy outperforms the UBI in several dimensions, increasing overall income, reducing poverty and inequality, and improving welfare. This result is robust to varying the magnitude of the cash transfer. We then investigate which aspects of the CCT make it so effective, and find that the schooling conditionality is crucial in ensuring its long- and even short- run success.eng
dc.identifier.urihttps://hdl.handle.net/10438/30151
dc.publisherEscola de Pós-Graduação em Economia da FGVpor
dc.relation.ispartofseriesEnsaios Econômicos;821
dc.subjectEconomiapor
dc.subject.areaEconomiapor
dc.subject.bibliodataRenda - Distribuiçãopor
dc.subject.bibliodataÁreas subdesenvolvidas - Condições econômicaspor
dc.titleUniversal Basic Income in Developing Countries: Pitfalls and Alternativeseng
dc.typeWorking Papereng
fgv.relation.ispartofFGV EPGE - Ensaios Econômicospor
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