183 CHAPTER 6 The Political Economy of Universal Basic Income Jurgen De Wispelaere and Ruslan Yemtsov T his chapter discusses the political feasibility of a universal basic income (UBI) from a broad political economy perspective. In recent years, political interest in UBI has grown exponentially, with local, regional, and national decision makers initiating UBI experiments. 1 Elsewhere, governments or political actors have com- missioned high-level reports examining the case for UBI. 2 Chapter 1 provides details of these developments in countries as diverse as Finland, India, the Islamic Republic of Iran, Kenya, Mongolia, and the United States. Political decisions are typically grounded in economic interests. The net gains or losses from the introduction of UBI will depend on its financing and the performance of programs it replaces. Financing a meaningful level of UBI requires mobilizing additional funds; how progressive the tax regime is determines the distribution of gains and losses from the UBI. 3 If a larger share of taxes is paid by the rich, the absolute majority of the population is likely to gain from introduction of a UBI. In a democratic system where voters follow their interests, one can predict that policy makers who institute a UBI are likely to enjoy increased political support; such a mechanism is called a “feedback loop.” However, this simple view does not fully reflect reality. There is a growing body of economic theory that seeks to predict (using economic modeling tools) political decision making on policy choices (Commander 2012; Khemani 2017; World Bank 2008, 2016, 2017). Political economy analysis seeks to identify political factors that lead to instituting and implementing a given policy. Such factors may relate to perceptions and values, the institutional structure of the decision-making process, the political power or influence of possible winners and losers, the credibility of proposed policy changes, and the effective- ness of communication. The specific challenge for a UBI is that determining a technically