A quantifiable model of a Global Basic Income and Cash Transfer Programmes

The use of cash transfer schemes (CTPs) as a tool for addressing poverty, inequality as well as other socially desirable behavioural, educational, health, intergenerational, environmental outcomes has become increasingly widespread in practice and prominent in policy debates in LMICs (as well as in OECD countries). For example, CTPs have been used as a component of the Tanzania Social Action Fund and a Senior Citizens’ Grant in Uganda with similar schemes in Kenya and Malawi as well as the Bolsa Familia in Brazil and elsewhere in Latin America, such as in Mexico, Colombia, Ecuador, and Chile; the latest Economic Survey 2016-17 by the Govt. of India has an entire chapter on the potential merits/drawbacks of introducing a universal basic income (BI) to combat poverty while DFID support the ongoing Benazir Income Support Programme in Pakistan.

CTPs are implemented in settings where lifetime incomes are low and uncertain, psychological factors (aspirations, beliefs, agency, attitudes) in decision-making, cultural expectations and market failures lead to adverse education, health, gender and other economic/social outcomes. Existing CTPs tend to be conditional, time limited and can be discontinued as donor and policy-maker funding priorities change. Economic theory suggests that the exact nature of conditionality and the time limits in a CTP, the choice of the target population, the presence (or absence) of complementary psychological training interventions and public investment in infrastructure, will all matter in determining their impact.
A number of researchers have looked at the impact of CTPs and BI on various outcomes relevant to the achievement of CTPs. A recent ODI DFID commissioned report (Bastagli et. al. 2016) on cash transfer schemes highlights a number of gaps in the empirical understanding of impact of conditional cash transfer schemes such as “the role of frequency and timing of payments, type or nature of conditionality … the longevity of impacts in the years after households stop receiving transfers”.
Building on existing empirical work, this project will develop dynamic, mathematical models grounded economic theory and behavioral economics, to examine the channels through which CTPs, including BI, operate on human welfare. The project will study the sustainability of CTPs, including a lifetime global basic income (GBI), to investigate whether a lifetime GBI can be self-financing (i.e. whether World GDP increases by more than x% - the initial cost of implementation - over time). Using insights from behavioral economics and decision-making under uncertainty, we will model the impact of different types of CTPs (including a lifetime BI) on individual decision-making. We will, then, embed behavioral decision-making by agents in social networks and other interactive settings that allow for capital, physical infrastructure, educational/health externalities and intergenerational effects (e.g. overlapping generation models). We will model the impact of different types of GBI and other CTPs under different circumstances combining both micro-, and macro-economic simulation, calibrating key model parameters using existing data. We will quantify the opportunity costs and welfare impacts/trade-offs of a GBI compared to other CTPs in the medium to long term, including impacts on inequalities. We will quantify the welfare impact of a GBI on individuals and their children but also on society and the economy as a whole in the medium to long term. We will examine the conditions under which a GBI, if implemented globally, will become self-financing over time (i.e. add to global GDP more than its initial cost).