A micro-macro-economic modelling approach to major welfare system reforms: the case of a Universal Basic Income for Scotland

This paper develops – and applies – a micro-macroeconomic modeling approach for assessing major welfare system reforms. With a growing interest in the value of bold welfare reforms in the light of persistent and widening inequalities, we demonstrate the value of a comprehensive analysis of both the (micro) impact upon the distribution of household incomes and wider (macro) impacts upon national income, unemployment and government spending. By combining microsimulation with CGE modeling, we argue that our findings demonstrate the importance of any major social welfare or broad fiscal reform being the subject of a micro-macro modeling approach. We illustrate this through an application to the introduction of a universal basic income in Scotland.