Universal Basic Income in the Developing World

Two interesting articles on UBI.

First is this new NBER paper by Abhijiet banerjee, Paul Niehaus and Tavneet Suri:

Should developing countries give everyone enough money to live on? Interest in this idea has grown enormously in recent years, reflecting both positive results from a number of existing cash transfer programs and also dissatisfaction with the perceived limitations of piecemeal, targeted approaches to reducing extreme poverty. We discuss what we know (and what we do not) about three questions: what recipients would likely do with the incremental income, whether this would unlock further economic growth, and the potential consequences of giving the money to everyone (as opposed to targeting it).

Bottom line:

First, the benefits of targeting may be overestimated by analyses that do not take into account the incentives it generates or the realities of implementation on the ground. Universal or near-universal approaches deserve more consideration than they often receive.

Second, the kinds of targeting that will make most sense will often be relatively simple, such as geographic targeting. Designers should guard against creating too much discretion for the front-line staff who implement targeting, including the implicit discretion that is created when a policy is too
complicated for beneficiaries to understand it and hold local officials to account. However, these targets may perform extremely poorly in reaching the poor.

Third, it may be possible to build small ordeals into the design of programs to create some targeting by self-selection and hence make programs more progressive. For example, if a government offered a small basic income to everyone but with some hassle costs involved in collecting it (e.g.
a weekly trip to an ATM), then the wealthier households might simply not bother to participate. The danger here of course will be to not exclude those for whom the ordeals are simply too difficult (e.g. the disabled) and so special provision should be made for them.

Finally, we note that the per-person costs of delivering transfers are falling rapidly in many places due to advances in last-mile digital payments infrastructure. All else equal this will tend to further increase the appeal of broad or universal targeting.


Mint features this interview of Prof Guy Standing of  School of Oriental and African Studies, University of London. He says instead of spending billions on subsidies and government programs, one should just transfer a basic income universally:

Why do you advocate a basic income?

The idea of basic income is that every individual would receive a regular cash payment, monthly or weekly, and it would be paid by the state… so it’s a right. The unconditional aspect is important because it is not paternalistic; in other words, it allows the person to use the money as they decide. That is different from many forms of conditional schemes—for instance Narendra Modi’s new scheme for Indian farmers or (Congress president) Rahul Gandhi’s proposed scheme for low income groups which requires targeting and selection. When you do that, you have high exclusion errors. Basic income involves direct transfer to an individual, which reduces a whole lot of administrative costs, is transparent and minimises corruption. The debate about welfare (policies) in India is intellectually corrupt due to the pretense that complex schemes can actually work.

You can think of basic income as a modest payment or as an alternative to social welfare schemes. My own preference is to see them as a matter of social justice: the reasoning is both ethical and philosophical. First of all, the wealth and income of all of us has far more to do with the efforts of generations before us than anything we did ourselves. We allow private inheritance of wealth, but in a sense this is also a public inheritance… the collective inheritance, the commons, (from where) everybody should earn an equal dividend. The second ethical reason is that it enhances the freedom of individuals to say no to exploitative and oppressive relationships. It also emancipates people to take control of their lives to a certain extent. The third ethical reason is that it provides basic security, a human right. Studies have shown that when people know that they won’t be starving tomorrow, their mental abilities increase, their capacity to be rational improves. There are also economic reasons—that it gives to the community and to individuals the capacity to make decisions about work, investments, and savings, and so on.



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