« Back to Results

The Impact of Unconditional Cash Transfers in the United States

Paper Session

Sunday, Jan. 7, 2018 1:00 PM - 3:00 PM

Pennsylvania Convention Center, 109-A
Hosted By: American Economic Association
  • Chair: Ioana Elena Marinescu, University of Pennsylvania

The Labor Market Impacts of Universal and Permanent Cash Transfers: Evidence From the Alaska Permanent Fund

Damon Jones
University of Chicago


We estimate the labor market impacts of universal and permanent cash transfers. While an income transfer may typically be expected to decrease individual labor supply, it may alternatively reduce fixed costs of employment. Furthermore, a universal transfer may also have general equilibrium effects. Since 1982, all Alaskan residents are entitled to a yearly cash dividdnt from the Alaska Permanent Fund. We use the current Population Survey and a synthetic control method and fail to reject the null hypothesis of no effect on employment. Meanwhile, on the intensive margin, we find an increase in part-time work. We discuss the implications of these results on the effect of a universal basic income on the labor market.

The Long-Term Effects of Cash Assistance

David Price
Princeton University
Jae Song
Social Security Administration


We investigate the long-term effect of cash assistance for beneficiaries and their children by following up, after four decades, with participants in the Seattle-Denver Income Maintenance Experiment. Treated families in this randomized experiment received thousands of dollars per year in extra government benefits for three or five years in the 1970s. Using administrative data from the Social Security Administration and the Washington State Department of Health, we find that treatment caused adults to earn an average of $1,800 less per year after the experiment ended. Most of this effect on earned income is concentrated between ages 50 and 60, suggesting that it is related to retirement. Treated adults were also 6.3 percentage points more likely to apply for disability benefits, but were not significantly mroe likely to receive them, or to have died. These effects on parents, however, do not appear to be passed down to their children: children in treated families experienced no significant effects in any of the main variables studied. These results for children are estimated precisely enough to rule out effects found in other contexts and inform the literature on intergenerational mobility. Taken as a whole, these results suggest that policymakers should consider the long-term effects of cash assistance as they formulate policies to combat poverty.

The Effects of Increased Income on Children's Academic Achievement: Evidence From an Emerging Natural Experiment

Elizabeth Ananat
Duke University


We take advanage of an emerging natural experiment - the extraction of natural gas in the Marcellus Shale geological formation - to study the heterogeneous effects of quasi-experimental increases in family income on children's academic achievement across the income distribution. There are three exogenous sources of variation in expected Marcellus Shale income: the quality of the shale below a property, the property rights in the area, and state law on whether extraction is allowed; shale quality strongly and robustly predicts both royalty and total income, but only where expected given property rights and state law. We therefore conduct placebo tests using data from New York, where there is a moratorium on fracking. We find that increased income improves children's test scores, but only among economically disadvantaged families.

Explaining Consumption Excess Sensitivity With Near-rationality: Evidence From Large Predetermined Payments

Lorenz Kueng
Northwestern University


Using new transaction data I find that consumption is excessively sensitive to salient, predetermined, large and regular payments from the Alaska Permanent Fund, with a large average marginal propensity to consume (MPC) of 30% for nondurables and services. This excess sensitivity is very heterogeneous: The deviation from the standard consumption model is largest for households for whom the loss from failing to smooth consumption is smallest in terms of equivalent variation. The estimated MPCs are monotonically decreasing in the loss and increasing in income for households with sufficient liquidity. I show that the economically and statistically significant excess sensitivity is consistent with households following near-rational alternative plans. For macroeconomic policies, such as an economic stimulus program, these near-rational alternatives might represent the more relevant behavior than the standard consumption model.
Hilary Hoynes
University of California-Berkeley
Daniel Sacks
Indiana University
Chloe East
University of Colorado-Denver
Michael Gelman
Claremont McKenna College
JEL Classifications
  • H2 - Taxation, Subsidies, and Revenue
  • I3 - Welfare, Well-Being, and Poverty