Universal basic income: A feasible alternative to move people out of poverty in Mexico?

Abstract

This paper evaluates the effectiveness of social policy to alleviate poverty in Mexico; where poverty is persistent, social programs are numerous and complex to monitor. Our analysis uses MEXMOD tax-benefit microsimulation. We simulate four scenarios that grant direct money transfers to individuals in multidimensional poverty, elderly people, families with children under 15 years old, and a universal basic income. The more generous and broader the coverage is, the costlier the policies. The first-best policy is the universal basic income, which can eradicate extreme poverty at the cost of 10.61 % of the gross domestic product. The least effective policy transfers only to older people.