Minimum Wage, Unemployment Insurance and Universal Basic Income in a Wealth Concentration Process: A Theoretical Approach

Abstract: Ortiz and Castillo (2020) built a multisector economic model where concentration of capital ownership diminishes the society´s purchasing power capacity. After some concentration threshold is overcome, labour unemployment rises due to the lack of effective demand, the wage rate must be set to the minimum, and distribution of income shifts in favour of capital. Based on that approach, this paper analyses two alternative policies: an unemployment insurance and a universal basic income. The unemployment insurance program is fairer than the competitive outcome but it is not efficient, whilst the optimal universal basic income is fairer and efficient. An minimum wage rate that minimizes the unemployment rate is also found.