Socioeconomic disparities in parental spending after universal cash transfers: the case of the Alaska dividend 

Social Forces, soab119, https: //doi.org/10.1093/sf/soab119

Commentary

Parental spending on children can be an important channel for promoting human capital development and material well-being, but given the well-known socioeconomic disparities in parental spending on children, it is also a channel that perpetuates social inequality.

Several studies have documented the extent to which current family income is related to spending on children, but we still know very little about the causal effect of additional income on child-related spending across socioeconomic strata.

The study was examining the impact of income growth from universal, unconditional cash transfers from the Alaska Permanent Fund on child-related spending.

Using long-term household expenditure data from the 1996-2015 Consumer Expenditure Survey, we exploit exogenous variation in the generosity of the Alaska dividend to estimate short- and long-term disparities in parental spending attributable to the payments.

The results identify a unique phenomenon comparing the behavior of high- and low-income parents after an increase in income.

We find that low- and middle-income parents use cash transfers in the short term to catch up with wealthier parents in the long term. However, low-income parents are unable to keep up with the long-term increase in child-related spending by middle-income parents.

This explains the replication of socioeconomic inequality and the resulting impact on currently proposed cash transfer policies.