Unemployment effects of the Chilean basic-income scheme in a labor search and matching framework with precautionary savings
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Date
2021
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Abstract
In this thesis, I incorporate a minimum wage and a basic-income scheme to a standard model of labor searchfrictions with endogenous separations. Increasing the minimum wage generates a negative spillover on bargained
wages, dampening the increase of unemployment through job creation in this framework. The governmentguaranteed minimum income for workers is found to altogether counteract the equilibrium effects of the minimum
wage by subsidizing low productivity matches. Numerical exercises find that the policies have a quantitatively
small effect on labor outcomes in this context. The model is then extended to include risk-averse consumers and
Bewley-Huggett-Aiyagari incomplete asset markets, where computational experiments suggest that the policy
effects can be amplified through wage dependence on wealth. A numerical exercise suggests that the minimum
wage has detrimental, albeit small, welfare effects on workers and that the basic income policy could be welfare
improving on average for both employed and unemployed workers.
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Tesis (Magíster en Economía)--Pontificia Universidad Católica de Chile, 2021