Basic income, wealth inequality and welfare: A proposed case in New Zealand

Universal basic income (UBI) may be defined as a government programme that regularly distributes a set amount of income to every citizen. While many countries currently adopt need-based programmes, the idea of introducing a UBI programme has been discussed politically in several countries. For instance, The Opportunity Party in New Zealand proposed paying NZ$13,000 per year to every adult citizen as basic income. Unless the amount of transfer per person decreases under the new programme, the government will have to increase tax rates. If a difference exists in labour supply and saving responses to the increases in tax rates among households, wealth distribution will change. This study examines the details of the proposed UBI programme and demonstrates that it will increase wealth inequality across households and decrease the welfare of different types of households classified by wage level. (C) 2021 Economic Society of Australia, Queensland. Published by Elsevier B.V. All rights reserved.