Browsing by Author "Saarinen, Sofia"

The first wave of basic income experiments took place in North America between the 1960s and 1980s, and the second wave started in the early 2000s and is still ongoing globally. Experiments are used to gain knowledge about effects that basic income has on labour supply, poverty, and welfare. This thesis is a literature review that utilises labour supply theory to examine labour supply effects that are observed when experimenting basic income and negative income tax policies with randomised controlled trials. The purpose is to find possible causes of differing results with the help of labour supply theory and by carefully studying the characteristics of the experiments. The topic is relevant as experimental results can be used when making decisions about future welfare reforms. Previous research on basic income has been done by Banerjee, Niehaus, and Suri (2019), Ghatak and Maniquet (2019), and Hoynes and Rothstein (2019), who find that the implementation of a basic income reduces labour supply more in advanced countries than they do in developing countries. Robins (1985) and Hum and Simpson (1993) find that negative income tax experiments resulted in labour supply reductions. On the other hand, other authors find that a basic income decreases labour supply only for those who are generally supposed to work less: the elderly, those with disabilities or illnesses, mothers of young children, and children (De Paz-Báñez, Asensio-Coto, Sánchez-López, & Aceytuno, 2020). I conclude that a universal basic income redirects labour supply in developing countries from wage labour to self-employment. However, exact increases or decreases in total labour supply are unknown. Negative income taxes decrease labour supply by few weeks of full-time employment per year. Although there does not seem to be a clear causal effect between the variation of experimental design and the results reported by the 21st century experiments, factors such as the structure of the research sample, geographical area, type of poverty trap, and size of the increase in living standards created by basic income may affect the beneficiaries’ labour supply.