Regional Inequalities and the Plea for Universalism: Evidence from the Finnish UBI Experiment

Abstract A central question in the development of national socio-political systems concerns how to ensure fair distributional outcomes. At the level of practical policy-making, this often translates into determining an appropriate balance between universalism and targeting – for instance, between densely and sparsely populated areas, between affluent and disadvantaged municipalities, or in contexts where household characteristics vary markedly. A universalist approach to these challenges is to disregard the specific attributes of residential areas and other background factors, as exemplified by the design of a universal basic income (UBI). In this article, we address the question of distributional fairness by utilising data from the Finnish UBI experiment (2017–2018). We ask what kind of differences in wellbeing there were within and between the treatment and control groups according to place of residence. We ask if UBI produced similar effects on wellbeing across different places (accumulation), or did it even out (compensation) or enlarge (multiplication) differences in wellbeing of residents living in urban and rural areas. We concentrate on two crucial aspects of wellbeing, i.e., health and ability to cope economically. Our results demonstrate pronounced regional gradients: problems are biggest in rural municipalities. This pattern is evident in both the treatment group (TG), which received the basic income, and the control group (CG). Although receiving a basic income significantly alleviated such difficulties across all regional categories, the relative gap between rural and urban municipalities remained unchanged in both the TG and CG. This indicates that UBI was not a sufficient instrument for reducing regional disparities; its effects were more accumulative than compensatory. Consequently, while there is a clear case for strengthening universal economic security, there is simultaneously a compelling need for more targeted compensatory policy measures.