Modelling the economic impacts of a Citizen’s Basic Income in Scotland

The aim of this project was to estimate the economic impacts if a Citizen’s Basic Income were implemented throughout Scotland. The project was carried out jointly with the Fraser of Allander Institute at the University of Strathclyde and IPPR Scotland and involved combining results from a tax-benefit microsimulation model and a general equilibrium model of the Scottish economy.

What is the need?

Work is currently taking place to assess the feasibility of carrying out a pilot of a Citizen’s Basic Income in parts of Scotland. However, any such pilot will not be on a large enough scale or of long enough duration to allow the full economic effects of a Citizen’s Basic Income to be estimated. This project fills this gap. More detail on the context for this work can be found at https://basicincome.scot/.

What are we doing?

The project involved modelling the potential economic impact of a Citizen’s Basic Income in three stages.

Stage 1 used a tax-benefit microsimulation model to estimate the direct effects of a Citizen’s Basic Income. This simulated the net income for each member of a sample of the Scottish population where current policies continue unchanged, and where a Citizen’s Basic Income has been introduced.

This allowed calculation of the estimated change in income for each member of the sample, the effects of the policy on the distribution of income and on poverty, and the direct fiscal costs of the policy.

Stage 2 used a general equilibrium model for the Scottish economy to estimate the longer-term effects on the macroeconomy of Scotland. Changes to household incomes and to the government’s fiscal position estimated during Stage 1 were used as inputs to the macroeconomic modelling.

Stage 3 used the tax-benefit microsimulation model to estimate the distributional, poverty and fiscal impacts of the macroeconomic changes estimated in Stage 2.

The MMU Policy Evaluation Research Unit worked with IPPR Scotland to carry out the parts of the project involving microsimulation modelling.

What will be the outcomes?

The results of the project will form part of the evidence base for the Scottish Government and other stakeholders when the decision on whether to implement a Citizen’s Basic Income is taken. The modelling work will also inform the wider debate about the potential costs and benefits of a Citizen’s Basic Income.

What are the timescales?

A draft report was published in June 2020.

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