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The Employment Effects of Generous and Unconditional Cash Support

Working Paper 2023-638

Abstract

While unconditional cash transfers have been studied extensively in developing countries, little is known about their effects in a wealthier context. Through a randomized controlled trial, we study the employment effects of a generous and unconditional transfer targeting low-income families in Spain. Two years into the program, subjects assigned to treatment are 20 percent less likely to work than subjects assigned to a control group. Assignment to an activation plan does not attenuate adverse effects; a more lenient transfer withdrawal rate does. It appears that effects are driven by subjects with children, suggesting substitution of labour for care tasks.

Authors: Xavier Ramos, Timo Verlaat, Federico Todeschini.

Keywords: welfare reform, cash transfer, basic income, policy evaluation, RCT
JEL: C93, H53, I38, J64