Ex ante evaluation of the basic income in Ecuador: Effects on poverty and inequality

Abstract

The covid-19 pandemic has caused the fall of economies, and the increase of unemployment, poverty, and inequality. This has influenced getting back to the concept of basic income, which seeks to transcend from a welfare vision of the state into an equitable society that guarantees the well-being of its population. The objective of this work is to carry out an ex ante evaluation of the effects on poverty and inequality of the implementation of basic income in Ecuador. The methodology consists of a microsimulation exercise based on the Enemdu (Instituto Nacional de Estadística y Censos [inec], 2019). The results indicate that by assigning a monthly transfer equal to the value of the income poverty line for adults and 30% for minors, income poverty would decrease from 25 to 6%; the middle tier would ascend to half of the population, and the Gini coefficient would decrease from 0.473 to 0.391. This represents a cost of 12.5% of gross domestic product (gdp), with a need for financing through additional resources of 51%. Three main aspects are distinguished to reflect on the implementation of a public policy of this type: the political will of the authorities, a national agreement, and a sustainable financing strategy.