Unconditional Endowment and Acceptance of Taxes: A Lab-in-the-Field Experiment on UBI with Unemployed

Abstract

A universal basic income (UBI) would be a guaranteed income floor for both the employed and the unemployed, from which economic theory predicts a gain in bargaining power and a disincentive to work. For high earners, the increase in taxes necessary to fund this program would decrease their motivation to earn. To assess these aspects, we conducted a lab-in-the-field experiment at a State Employment Service office in Spain. The unemployed participants received either an initial unconditional endowment, framed under the logic of the solidarity condition of UBI (UBI treatment) – to examine the taxes’ effect – or as a participation fee (FEE) or no initial endowment (NONUBI). Subsequently, they faced one default randomized task from a set of four paid real-effort tasks. To study bargaining power, they could change the task up to three times and/or skip all tasks and conclude the experiment. In the FEE treatment, they yielded the highest earnings. While we did not find a statistically significant difference in earnings between the FEE and the NON-UBI treatments, the UBI differed from the NON-UBI and FEE. A likely reason could be a crowding-out of motivation by the pressure to reciprocate without believing in other participants’ deservingness of the UBI. In addition, the results reveal that females change tasks more frequently than males.