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Five Crossroads on the Way to Basic Income. An Italian Tour

ABSTRACT

The current Italian income support policies are defective with respect to efficiency and equity. A reform must face five crucial choices: universal vs. categorical policies; transfers vs. subsidies; unconditional vs. means-tested policies; coverage; flat vs. progressive tax rules. Using a microeconometric model and a social welfare methodology, we simulate—under fiscal neutrality and market equilibrium—the effects of 30 policies obtained from three basic types: conditional basic income, unconditional basic income and wage subsidies. The alternative reforms are evaluated according to four different social welfare criterion: the pure utilitarian and three different versions of a Gini-type social welfare function. The pure utilitarian criterion favours reforms based on a wage subsidy or a combination of wage subsidies and transfers. The Gini-type criteria favour unconditional transfers or combinations of wage subsidies with unconditional transfers. Most of the reforms turn out to be preferable to the current system: the choice set available for selecting a “best” reform given different criteria is very large.