The Impact of Unconditional Cash Transfers on Consumption and Household Balance Sheets: Experimental Evidence from Two U.S. States
Abstract
We provide new evidence on the causal effect of unearned income on consumption, balancesheets, and financial outcomes by exploiting an experiment that randomly assigned 1000 individ-
uals to receive $1000 per month and 2000 individuals to receive $50 per month for three years. The
transfer increased measured household expenditures by at least $300 per month. The spending im-
pact is positive in most categories, and is largest for housing, food, and car expenses. The treatment
increases housing unit and neighborhood mobility. We find noisily estimated modest positive ef-
fects on asset values, driven by financial assets, but these gains are offset by higher debt, resulting
in a near-zero effect on net worth. The transfer increased self-reported financial health and credit
scores but did not affect credit limits, delinquencies, utilization, bankruptcies, or foreclosures. Ad-
justing for underreporting, we estimate marginal propensities to consume non-durables between
0.44 and 0.55, durables and semi-durables between 0.21 and 0.26, and marginal propensities to
de-lever of near zero. These results suggest that large temporary transfers increase short-term con-
sumption and improve financial health but may not cause persistent improvements in the financial
position of young, low-income households.