The effects of Basic Income on child-related investments: The case of the Alaska Dividend

• In Event: 4265 - Social Policy

Abstract

Family income affects children’s well-being and shapes the intergenerational transmission of inequality. Raising parental income via government transfers has the potential to mitigate this process, but we know little about the precise mechanisms through which children benefit from cash transfers. This study investigates one such mechanism: expenditures on children. It uses data from the 1996-2015 Consumer Expenditure Surveys to investigate whether and how the Alaska Permanent Fund Dividend—the only universal, unconditional, and permanent Basic Income program in the industrialized world—affects parents’ spending on children. It relies on exogenous variation in the timing and generosity of Dividend payouts to estimate whether and how child expenditures change as a result of unconditional increases to parental income. First, I investigate whether levels of child-related consumption increase immediately after the Dividend payout. Second, I assess whether child-related investments are prioritized (i.e., increase proportionally more) compared to other types of spending. Finally, I identify whether there are socioeconomic differences on the consumption strategies employed by parents who are beneficiaries of this program. Findings from this study suggest that the average Alaskan household increases its levels of child-related consumption by 78% more than non-Alaskan households on the month in which they receive the Dividend payout. Alaskan households also prioritize child-related spending immediately after the payout, and increase the share of their total monthly expenditure dedicated to children by 24% compared to their non-Alaskan counterparts. These increases are driven by spending on hobbies and organized activities, and on children’s clothes. Finally, results indicate modest socioeconomic differences in the patterns of consumption immediately after the payout. These findings shed light on an important mechanism of the reproduction of social inequality and reveal how Universal Basic Income policies may equalize opportunity amid growing inequality in parental investments in children.

Author

• Mariana Amorim, Washington State University