The political sustainability of a basic income scheme and social health insurance

This paper studies within a two-stage framework the political economy of a basic income (BI) and social health insurance (SHI) scheme. At the constitutional stage, individuals decide whether these schemes are implemented behind a veil of ignorance about their future income and risk type. This decision is made in anticipation of the outcome at the second stage in which individuals vote on the payroll tax to finance a BI and the contribution rate of a SHI scheme provided these schemes have been implemented. Depending on the amount of healthcare expenditure and the inequalities in income and risk, only a social health insurance scheme is implemented at the constitutional stage.