Universal basic income in the context of biased technological change

Abstract

In the last decades, income inequality has been on the rise in theU.S. The growing skill premium suggests the pivotal role of skill-biased technological change (SBTC) in promoting the observed in-crease in inequality levels. In this context, labor income tax struc-tures have been central to the policy debate. I develop an overlap-ping generations model to perform a welfare evaluation of Univer-sal basic income (UBI) tax structures and verify how these interactwith SBTC. I find that an UBI system would have improved so-cial welfare in 2010 when compared to the existing tax system anddetermine that this result is primarily motivated by SBTC.