Socioeconomic Disparities in Parental Spending after Universal Cash Transfers: The Case of the Alaska Dividend

Abstract

Abstract Parental child-related spending represents an important pathway to promote children’s human capital development and material well-being. It is also, however, a pathway that perpetuates social inequalities given the well-known socioeconomic divide in parental spending on children. Although several studies have documented the extent to which current family income is associated with spending on children, we still know little about the causal effects of additional income on child-related spending across the socioeconomic strata. In this paper, I examine the effects of income gains due to universal and unconditional cash transfers from the Alaska Permanent Fund Dividend on child-related spending. Using longitudinal household expenditure data from the 1996–2015 Consumer Expenditure Surveys, I exploit exogenous variation in the generosity of the Alaska Dividend to estimate short- and long-term disparities in parental expenditures resulting from payouts. Results provide a unique opportunity to compare the behavior of high- and low-income parents after an income boost. I find that low- and middle-income parents use cash transfers to catch up with their more affluent counterparts in the short and long term. Low-income parents are, however, unable to keep up with the long-term increases in child-related spending made by their middle-income counterparts. Implications of results for the reproduction of socioeconomic inequalities and for current and proposed cash-transfer policies are discussed.