A Quasi-Experiment for Universal Basic Income: Evidence from Remittances in Colombia

Abstract

With the purpose of investigating the impacts of universal cash transfers, I use remittances in Colombia to study the heterogeneous effects of an exogenous increase in a household “unearned income” on: labor supply (extensive and intensive margin), entrepreneurship, and education. I also identify how these effects vary across the income distribution depending on how much the transfer represents as a proportion of labor income and if the amount of the transfer matters in order to trigger an effect on individuals’ behavior. Estimates suggest that (i) on average, recipients of remittances do not experience an effect on the outcome variables, but (ii) when the transfer as a proportion of the total household labor income corresponds to the third quartile of the distribution, the likelihood of becoming an entrepreneur significantly increases as well as school enrollment. Even though results suggest that people do not stop working, they reduce the number of hours worked.