Fact checking universal basic income: can we transfer our way out of poverty?


Berk Ozler over at the World Bank's Development Impact:

New York Times published an article last week, titled “The Future of Not Working.” In it, Annie Lowrie discusses the universal basic income experiments in Kenya by GiveDirectly: no surprise there: you can look forward to more pieces in other popular outlets very soon, as soon as they return from the same villages visited by the Times. One paragraph of the article drew my attention in particular: “One estimate, generated by Laurence Chandy and Brina Seidel of the Brookings Institution, recently calculated that the global poverty gap — meaning how much it would take to get everyone above the poverty line — was just $66 billion. That is roughly what Americans spend on lottery tickets every year, and it is about half of what the world spends on foreign aid.”

Well, I don’t know about you, but that paragraph makes me think that if we just were able to divert 50% of the current foreign aid budget towards cash transfers, we would eliminate extreme poverty. But, is that really true? The answer is: “not even close.”

See, that calculation assumes that we know exactly who is poor, how far below the poverty line each person exactly is, give them that precise amount, etc. (Actually, Zhang, Chandy, and Noe outline their simplifying assumptions in footnote 2 of this post.) How close are we to that in reality? Again, far away – at least in developing countries.

More here.