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A Basic Income Guarantee - Financial and Economic Effects in Germany / submitted by Niklas Prinz
AuthorPrinz, Niklas
CensorKapeller, Jakob
PublishedLinz, 2018
DescriptionV, 90 Blätter : Illustrationen
Institutional NoteUniversität Linz, Masterarbeit, 2018
Document typeMaster Thesis
Keywords (GND)Volkswirtschaftslehre / Arbeitsmarkt / Einkommen
URNurn:nbn:at:at-ubl:1-21523 Persistent Identifier (URN)
 The work is publicly available
A Basic Income Guarantee - Financial and Economic Effects in Germany [2.15 mb]
Abstract (English)

In this thesis a Basic Income Guarantee consisting of a net payment of 900 (300 for children), a health care coupon of 273 per month and a flat income-taxation of 61% has been considered. It has shown that such a Basic Income Guarantee does not generally improve the financial situation of every household. Most vulnerable groups - especially single parents and current low-income ALG II receivers in high rent-level cities - financially lose. Yet, the flat income-taxation and the basic income abolish current inefficiencies of the tax and social system. In the current tax and social system a partly distorting incentive structure leads to strong disincentives to work (more) for certain income brackets. Households with low to high-middle incomes would mostly benefit financially from such a basic income reform. In case of short-term unemployment or old-age pension the current statutory unemployment and pension insurance supplies some status securing financial coverage subject to the previously earned wage. A Basic Income Guarantee only supplies the net basic income payment of 900 per month. Thus, middle to high income-earners lose some of their financial security or rather social status unless they privately provide for unemployment or old-age. Private provision, however, may enhance risky investment behavior and foster a liberalization of the welfare state. Yet, for low-wage households the Basic Income Guarantee can provide disincentives to work. Three effects on labor supply and hence the sum of wages were considered: A change in marginal income-tax rates, a wage increase by the employers current social insurance contributions and a wealth shock caused by the net basic income payment. Overall labor supply slightly decreases with an average elasticity of 0.1 (-1.38%) or 0.3 (-0.65%). With an average elasticity of 0.5 overall labor supply slightly increases by 0.09%. Labor supply of secondary earners (i.e. mostly married women) mostly decreases leading to no improvements towards the current system of married couples tax splitting also reducing married womens labor supply (at least for those with unequal wage levels). Also labor supply reactions slightly affect Germanys gross domestic product by -0.70% (with elasticity 0.1) and -0.33% (elasticity 0.3). With an elasticity of 0.5 labor supply reactions impact on the gross domestic product is 0.04%.

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