Universal Basic Income: A Dynamic Assessments

Universal basic income (UBI) is an increasingly popular policy proposal, but there is no evidence regarding its longer-term consequences. We find that UBI generates large welfare losses in a genshocks, and intergenerational linkages via skill formation and transfers. This conclusion is robust to various alternative ways of financing UBI. By using observationally equivalent models that eliminate different sources of endogenous dynamic linkages (equilibrium capital market and parental investment in child skills), we show that the latter are largely responsible for the negative welfare consequences.