Are temporary or permanent income payments better placed to boost demand during Covid-19?

Prabhakar, Rajiv (2021). Are temporary or permanent income payments better placed to boost demand during Covid-19? Basic Income Studies (Early access).

DOI: https://doi.org/10.1515/bis-2020-0022

Abstract

Covid-19 has sparked calls for a universal basic income as a way of coping with a demand shock caused by the pandemic. Temporary income payments have been part of the emergency response to the pandemic. This paper questions the effectiveness of temporary payments as a way to raise demand. Some observers claim that vouchers are better targeted at sectors hit hard by Covid-19 as people may have a tendency to save than spend from temporary payments. There may be a stronger case for permanent rather than temporary payments if the aim is to boost demand in the economy.

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