How Effective Is (More) Money? Randomizing Unconditional Cash Transfer Amounts in the US

Abstract

We randomized 5,243 US individuals in poverty to receive a one-time unconditional cash transfer (UCT) of $2,000 (two months' worth of total household income for the median participant), $500 (half a month's income), or nothing. We measured the effects of the UCTs on participants' financial well-being, psychological well-being, cognitive capacity, and physical health through surveys administered one week, six weeks, and 15 weeks later. While bank data show that both UCTs increased expenditures, we find no evidence that (more) cash had positive impacts on our pre-specified survey outcomes, in contrast to the incentivized predictions of both experts and a nationally representative sample of laypeople. We test several explanations for these unexpected results, including via two sub-experiments embedded in our trial. The data are most consistent with the notion that receiving some but not enough money made participants' (unmet) needs more salient, which caused distress. We develop a model to illustrate how receiving cash can sometimes also highlight its absence.

Keywords: Cash Transfers, Poverty, Welfare, Behavioral, Household Finance, Field Experiments

JEL Classification: C93, D91, G50, I30