Active citizen ’ s income , unconditional income and participation under imperfect competition : A normative analysis ∗

Various types of basic income schemes are considered to compensate the allocative inefficiencies induced by unemployment insurance systems. This paper develops a dynamic general equilibrium model of a unionized economy where participation to the labor market is endogenous and the budget of the State has to balance. It is shown that basic income schemes reduce the equilibrium unemployment rate. The normative analysis suggest that only the active population should be eligible to the basic income. Introducing an ‘active citizen’s income’ can be a Pareto-improving reform.