Does a Guaranteed Basic Income Encourage Entrepreneurship? Evidence from Alaska
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Does a Guaranteed Basic Income Encourage Entrepreneurship? Evidence from Alaska Robert M. Feinberg1 · Daniel Kuehn2
© Springer Science+Business Media, LLC, part of Springer Nature 2020
Abstract While the concept has been around for years, recently the policy notion of a “guaranteed basic income” (GBI)—or universal basic income—has had a resurgence of interest. In addition to rationales that relate to fairness and response to structural employment shifts due to automation and globalization, another motivation that is sometimes put forward for these plans is to encourage risk-taking by providing a safety net: There would be greater entrepreneurial activity if an unsuccessful entrepreneur had the GBI to fall back on. In this paper we investigate a rare long-standing example similar to a GBI in the US: the Alaska Permanent Fund Dividend program. This was not put forth as a GBI, and the annual amount is too small to allow an individual to rely fully on these funds; but for a moderate-to-large family the APF can replace a large share of a poverty-level income. Receipt of the APF also does not preclude a family from receiving other safety net benefits—food stamps, unemployment compensation—which suggests that the downside risk for a potential entrepreneur may be lower than in other US states. We initially examine trends in small-firm births in Alaska over time from the Census Bureau’s Business Dynamics Statistics 1977–2014—before and after the institution of the APF program (the first payment was in 1982)—relative to other US states to investigate a possible impact on entrepreneurship; the results suggest a positive effect—which appears to dissipate over time. We then turn to micro data from the Current Population Survey to examine changes in self-employment behavior in Alaska, with somewhat similar findings. Keywords Guaranteed basic income · Universal basic income · Entrepreneurship · Alaska Permanent Fund · Small-firm entry · Permanent Fund Dividend
Earlier versions of this paper were presented at the Southern Economic Association annual meetings in Washington, DC in November 2018 and the International Industrial Organization Conference in Boston in April 2019. We thank Emek Basker, Lidia Kosenkova, and an anonymous referee for helpful comments on those drafts. * Robert M. Feinberg [email protected] Extended author information available on the last page of the article
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R. M. Feinberg, D. Kuehn
1 Introduction While the concept has been around for years, recently the policy notion of a “guaranteed basic income” (GBI) or “universal basic income” has had a resurgence of interest.1 In addition to rationales for a GBI that relates to fairness and as a response to structural employment shifts that are due to automation and globalization, another motivation sometimes put forward for these plans is to encourage risk-taking by providing a safety net. Higher risk-taking could imply greater entrepreneurial activity if an unsuccessful entrepreneur had the GBI to fall back on. In this paper we inv
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