Windfalls and work requirements: Evidence from a field experiment in Malawi

Though the differential impacts of earned and unearned income have long been of interest to economists and policymakers, the study of this question is often conflated by other differences between the income streams. We conduct a field experiment in Malawi in which we exaimine the differential short-term effect of earned and unearned income on the allocation of expenditures and labor supply, holding all other factors constant. All participants receive an equal size cash payment and make the same time investment; half are required to work, and half are not. We find little evidence that income source affects the allocation of expenditures across categories, but do find that the work requirement increases overall expenditures immediately following the payment. Conversely, the work requirement results in a reallocation of labor supply away from household work in the very short term.