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Cash transfers and labor supply: Evidence from a large-scale program in Iran

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  • Salehi-Isfahani, Djavad
  • Mostafavi-Dehzooei, Mohammad H.

Abstract

This paper examines the impact of a national cash transfer program on labor supply in Iran. In 2011, Iran started monthly deposits of cash into individual accounts covering more than 70 million people and amounting to 28% of the median per capita household income. The payments were compensation for the sudden removal of hefty energy subsidies. The program has been heavily criticized for its disincentive for work, especially for the poor. We use panel data to study the causal effect of the transfers on labor supply using exogenous variation in the time households first started receiving transfers and in the intensity of treatment, which we define as the share of net transfers from the program in total per capita household expenditures. We find no evidence that cash transfers reduced labor supply, in terms of hours worked or labor force participation. To the contrary, we find positive effects on the labor supply of women and self-employed men.

Suggested Citation

  • Salehi-Isfahani, Djavad & Mostafavi-Dehzooei, Mohammad H., 2018. "Cash transfers and labor supply: Evidence from a large-scale program in Iran," Journal of Development Economics, Elsevier, vol. 135(C), pages 349-367.
    • Handle: RePEc:eee:deveco:v:135:y:2018:i:c:p:349-367
    DOI: 10.1016/j.jdeveco.2018.08.005
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    More about this item

    Keywords

    Cash transfers; Labor supply; Iran; Impact evaluation;
    All these keywords.

    JEL classification:

    • D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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