The Impact of Unconditional Cash Transfers on Consumption and Household Balance Sheets: Experimental Evidence from Two US States
Year: 2024
Type: report
Study design: Clinical Trial
Abstract: We provide new evidence on the causal effect of unearned income on consumption, balance sheets, 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 spend on non-durables between 0.38 and 0.50, on durables and semi-durables between 0.18 and 0.24, 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.
DOI: 10.3386/w32784
Language: English
Subfield: Finance
Domain: Social Sciences
SDG: No poverty
Open Access status: green
OpenAlex ID: W4401321075