The Effects of Cash Transfers on Adult Labor Market Outcomes
The basic economic model of labor supply has a very clear prediction of what should be expected when an adult receives an unexpected cash windfall: they should work less and earn less. This intuition underlies concerns that many types of cash trans...
| Main Authors: | , , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2018
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/334251523556191237/The-effects-of-cash-transfers-on-adult-labor-market-outcomes http://hdl.handle.net/10986/29707 |
| Summary: | The basic economic model of labor supply
has a very clear prediction of what should be expected when
an adult receives an unexpected cash windfall: they should
work less and earn less. This intuition underlies concerns
that many types of cash transfers, ranging from government
benefits to migrant remittances, will undermine work ethics
and make recipients lazy. This paper discusses a range of
additional channels to this simple labor-leisure trade-off
that can make this intuition misleading in low- and
middle-income countries, including missing markets, price
effects from conditions attached to transfers, and dynamic
and general equilibrium effects. The paper uses this as a
lens through which to examine the evidence on the adult
labor market impacts of a wide range of cash transfer
programs: government transfers, charitable giving and
humanitarian transfers, remittances, cash assistance for job
search, cash transfers for business start-up, and bundled
interventions. Overall, cash transfers that are made without
an explicit employment focus (such as conditional and
unconditional cash transfers and remittances) tend to result
in little to no change in adult labor. The main exceptions
are transfers to the elderly and some refugees, who reduce
work. In contrast, transfers made for job search assistance
or business start-up tend to increase adult labor supply and
earnings, with the likely main channels being the
alleviation of liquidity and risk constraints. |
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