The Effect of a Universal Basic Income on Life Decisions: Evidence from a Student Lab Experiment

A Universal Basic Income (UBI) is an unconditional cash transfer administered universally regardless of employment or economic status. A UBI, while typically thought of as a response to rising income inequality or threatening automation, has the potential to achieve a number of effects, only some of which are economic. And while a UBI could have positive effects, there are some critiques of UBI that warrant merit and will be examined in this paper after discussing the potential positive effects. An experiment was designed to test some of the theories promoted by UBI critics and proponents. Subjects, divided into two groups with the treatment group receiving a UBI, played an economic game where they made decisions about work and leisure, consumption, education, and savings. Subjects decisions were recorded and data was analyzed using OLS multivariate regressions to reveal results that generally align with real-world pilots. UBI recipients work less when they can use that time to achieve higher levels of education. When there is no opportunity for education, there was no statistically significant difference in the amount of time that subjects spent working. UBI recipients also had higher savings and consumption levels