Unconditional cash transfers and maternal labor supply: Evidence from Bavaria's family allowance

This paper investigates the labor supply effects of unconditional cash transfers aimed at young families, using the Bavarian Family Allowance (Familiengeld ), introduced in 2018. The policy provides € 250-300 monthly to families with children aged 13-36 months regardless of employment status or childcare use. Combining difference-in-differences estimates from two complementary panel datasets, I find no statistically significant effect on maternal employment: the pooled estimate is a small and imprecise +4.2 percentage points (95% CI [-1.8, +10.2]). Because Bavaria is the only treated state, I complement the difference-in-differences with randomization inference over placebo states and a synthetic difference-in-differences design that matches Bavaria's pre-policy trajectory; both confirm that Bavaria's estimate falls within the normal range of untreated states, and the specifications that most directly address an imperfect pre-trend-individual fixed effects and the synthetic estimator-center on zero. A triple-difference specification points to a larger positive response among single and low-income mothers, but this pattern does not survive randomization inference and is best read as suggestive. Given that the unconditional design generates only a modest income effect without altering the relative price of employment, the evidence does not support concerns that transfers of this size meaningfully reduce maternal labor supply, nor does it establish a positive activation effect.