Removing welfare traps employment responses in the Finnish basic income experiment by Jouko Verho, Kari Hämäläinen and Ohto Kanninen
By: Verho, Jouko
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Contributor(s): Hämäläinen, Kari | Kanninen, Ohto.
Material type: 
ArticlePublisher: 2022Subject(s): IMPUESTOS | RENTA BÁSICA | EMPLEO | FINLANDIA
In:
American Economic Journal : Economic Policy v. 14, n. 1, February 2022, p. 501-522Summary: This paper provides evidence that replacing minimum unemployment benefits with a basic income of equal size has minor employment effects at best. We examine an experiment in Finland in which 2,000 benefit recipients were randomized to receive a monthly basic income. The experiment lowered participation tax rates by 23 percentage points for full-time employment. Despite the considerable increase in work incentives, days in employment remained statistically unchanged in the first year of the experiment. Moreover, even though all job search requirements were waived, participation in reemployment services remained high.
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| OP 2135/2022/1-2 How do households value the future? | OP 2135/2022/1-3 Technology, taxation, and corruption | OP 2135/2022/1-4 Increasing hours worked | OP 2135/2022/1-5 Removing welfare traps | OP 2135/2022/2 American Economic Journal : Economic Policy | OP 2135/2022/2-1 The electric Gini | OP 2135/2022/3 American Economic Journal : Economic Policy |
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This paper provides evidence that replacing minimum unemployment benefits with a basic income of equal size has minor employment effects at best. We examine an experiment in Finland in which 2,000 benefit recipients were randomized to receive a monthly basic income. The experiment lowered participation tax rates by 23 percentage points for full-time employment. Despite the considerable increase in work incentives, days in employment remained statistically unchanged in the first year of the experiment. Moreover, even though all job search requirements were waived, participation in reemployment services remained high.
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