Can a basic income cure Baumol's disease?

Abstract

In this paper we investigate how a universal and unconditionally guaranteed “Basic Income”, financed by a higher tax rate on income, can help to remedy, among other things, the so-called Baumol disease concerning the production of the arts, on the one hand, as well as the problems, raised in the Linder Theorem with regard to the consumption of arts and culture, on the other hand. Using a neo-classical time allocation model, we show that a basic income system increases the output of both the formal and informal production of the arts, and promotes the consumption of arts by lowering the shadow price of time.