Unconditional Cash Transfers in the U.S.
Paper Session
Friday, Jan. 3, 2025 10:15 AM - 12:15 PM (PST)
- Chair: Ioana Marinescu, University of Pennsylvania
Household Response to a Guaranteed Income Policy: Evidence from a Randomized Experiment in Compton, California
Abstract
We present results of heterogeneity analysis from a two-year unconditional cash transfer program for low-income households in Compton, CA. 698 households were randomly selected to receive transfers averaging $500 per month over a two year period and 1,402 households were randomly assigned to a control group. Half of the recipients were paid twice per month and the other half once per quarter. We surveyed 1,074 respondents 18 months after the beginning of transfers. Consumption expenditures among treatment households were $302 per month lower than in the control group, closely mirroring their significantly lower non-transfer incomes. Within the context of recovery from the COVID-19 pandemic, these negative treatment effects indicate smaller increases and not absolute reductions. We find no effects on labor supply for full-time workers, though labor market participation is 11 pp lower among those working fewer than 20 hours per week at baseline relative to the control group. We find suggestive evidence that recipient households used the increase in disposable income to pay down debt: average non-housing debt balances declined by $2,190 over 18 months. We also find a significant improvement in housing security, but no effects on psychological well-being relative to the control group. The frequency of transfers matters for some outcomes; in particular, there is significantly lower credit card debt among the bimonthly treatment group. Stronger negative impacts are experienced by male recipients, including a negative impact on self-reported financial security. In contrast, female recipients experience significant improvements in financial security, and smaller negative impacts on earned income, expenditures, and assets relative to male recipients.A Randomized Controlled Trial on the Provision of Financial and Social Capital to Low-Income Households in the United States
Abstract
While poverty is primarily defined as a lack of financial resources, it is often comorbid with loneliness, stigma, and a lack of information. We propose that these challenges can be addressed by providing both financial resources and social capital (the ability to rely on others for company, support, and information). In this longitudinal field experiment, we tested whether, how, and why the negative effects of poverty could be reduced through financial and social capital. We randomized 1,488 low-income households (those living at 200% of the federal poverty line or lower) in Cambridge and Boston, MA, into one of four treatment arms: (1) receiving a “no strings attached” payment of $500 per month for 18 months, (2) developing social capital by engaging with a “peer group” of four to eight other participants, (3) both, or (4) neither. We examine the effects of these treatments on a wide range of outcomes, leveraging panel data and a rich array of datasets. Participants completed quarterly surveys, which measured financial, psychological, health, and family wellbeing outcomes, as well as a host of behavioral outcomes (e.g., time and risk preferences, incentivized public goods and trust games). Attrition was low: for 96.8% of participants, we have some post-baseline data. We complement this survey data with transaction-level bank data on how money is spent (22% of participants) and administrative online social platform usage data (100% of social-arm participants). For 87% of participants, we also observe administrative government welfare agency data: welfare receipt, employment, and transaction-level SNAP (food stamp) usage. Together, these data will offer insights into whether, how, and why financial and social capital can help alleviate poverty in the US. The trial concluded in 2023 and, following a pre-registered analysis plan, our results will be shared at this symposium.Discussant(s)
John Eric Humphries
,
Yale University
Julian Jamison
,
University of Exeter
Stanislas Lalanne
,
University of Oxford
JEL Classifications
- J0 - General