Universal Cash Transfers and Labor Market Outcomes
47 Pages Posted: 10 Apr 2019 Last revised: 27 Feb 2020
Date Written: March 21, 2019
One major criticism of universal basic income is that unconditional cash transfers discourage recipients from working. We estimate the causal effects of a universal cash transfer on short-run labor market activity by exploiting the timing and variation of a long-running unconditional and universal transfer: Alaska's Permanent Fund Dividend. We find evidence of both a positive labor demand and negative labor supply response to the transfers, document important heterogeneity across workers, and provide a set of placebo tests supporting our main results. Altogether, a $1,000 increase in the per-person disbursement leads to a 0.7% labor market contraction on an annual basis.
Keywords: Permanent Fund Dividend, Labor Supply, Universal Income
JEL Classification: J2, H24, I38, H53
Suggested Citation: Suggested Citation