Alaska Permanent Fund Research Articles

Economic Incentives Surrounding Fertility: Evidence from Alaska's Permanent Fund Dividend

Starting in 1982, the Alaska Permanent Fund Dividend allows each full-time resident in Alaska, including infants born in the qualifying year, to receive a sizable dividend. This dividend, which represents a form of a Universal Basic Income on a small scale, could alter incentives surrounding fertility. Using synthetic control and difference-in-differences models to account for confounding factors and unobserved heterogeneity, we model the effect of income on fertility by exploiting this income shock around 1982 using Natality files from Vital Statistics and abortion data from the Centers for Disease Control, merged with data from the Census on various state characteristics. Primary results suggest that the dividend increased fertility and reduced the spacing between births, particularly for females in the 20-44 year age group. Our results suggest that policies aimed at increasing income should consider fertility consequences and their implications for economic growth. Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

Universal Cash Transfers Reduce Childhood Obesity Rates

We evaluate the impact of universal income on childhood obesity. While the goals of implementing universal income are many, its influence on childhood obesity is of particular interest given the growing obesity epidemic and its future threat to global public health. We use evidence from Alaska’s universal income program, the Permanent Fund Dividend (PFD), which has provided annual, unconditional, and universal income to Alaskan residents for over thirty-five years. We use both survey and administrative data to evaluate how the availability of unconditional resources at an early developmental stage, in terms of PFD payments to the child, affects a child’s body mass index (BMI). Using date-of-birth eligibility cut-offs as an identification strategy, we find that an additional one thousand dollars in PFD payments decreases the probability of an Alaskan child being obese by as much as 4.5 percentage points. Back-of-the-envelope calculations for Alaska suggest these reduction may avert 500 cases of obesity and achieve medical cost savings of $2-10 million per year. These findings highlight just one of the potential social benefits of universal income and the potential it has as a tool for addressing the obesity epidemic.

Short-Term Labor Responses to Unconditional Cash Transfers

One major criticism of universal basic income is that unconditional cash transfers discourage recipients from working. We estimate the causal effects of a universal cash transfer on short-run labor market activity by exploiting the timing and variation of a long-running unconditional and universal transfer: Alaska's Permanent Fund Dividend. We find evidence of both a positive labor demand and negative labor supply response to the transfers, document important heterogeneity across workers, and provide a set of placebo tests supporting our main results. Altogether, a $1,000 increase in the per-person disbursement leads to a 0.7% labor market contraction on an annual basis.

Universal Cash and Crime

We estimate the effects of universal cash transfers on crime from Alaska's Permanent Fund Dividend, an annual lump-sum payment to all Alaska residents. We find a 14% increase in substance-abuse incidents the day after the payment and a 10% increase over the following four weeks. This is partially offset by an 8% decrease in property crime, with no changes in violent crimes. On an annual basis, however, changes in criminal activity from the payment are small. Estimated costs comprise a very small portion of the total payment, suggesting that crime-related concerns of a universal cash transfer program may be unwarranted.

Engineering Miracles: A Short Distance Between Creation and Value to Society

Special Section: The Value and Future of Petroleum Engineering In the JPT issue celebrating SPE’s 50th anniversary, John C. Calhoun addressed how distinctive petroleum engineering is from other engineering disciplines: “During the past several decades, consolidation and integration of four major elements of petroleum engineering have occupied the profession. The following lists these elements. Extending our capabilities to gain access to, to couple with, and to operate within a greater portion of the subsurface environment (e.g., offshore locations, over-pressured environments, marginal reservoirs, horizontal drilling, complex flow systems, acidizing, and hydrofracturing). Developing methods for detailed characterization of subsurface formations, their fluids, and their surroundings (e.g., geostatistics, well logging, indirect geophysical measurements, well-performance analysis, and basin analysis). Recovering a greater proportion of the petroleum within reservoirs that have been accessed and understanding the transfer operations that accompany the recovery (e.g., a broadened spectrum of injected fluids and fluid additives, phased fluid injection programs, extensions of reservoir flow paths, in-field drilling, and horizontal wellbores). Systematizing technological management and coupling it with business decision making (e.g., history matching, risk analysis, reservoir management, software packages, and team projects).”1 Since that issue a little over a decade ago, petroleum engineering feats have expanded on the past and made towering breakthroughs in resource recovery. Those breakthroughs came about with added emphasis on decision and risk analysis as an essential project element; a step up from what was referred to as a coupling with business. Reviewing our technology history thus requires highlighting the tangible breakthroughs with the necessary intangibles that enabled faster transformations with commercial success (Fig. 1). Tangible Breakthroughs Arguably the biggest breakthrough during the past 50 years was Mitchell Energy’s approach to making shale production viable. Well stimulation began in the mid-1800s with torpedoes used on Pennsylvania wells. It was the subject of the first JPT technology article published in 1949, “A Hydraulic Process for Increasing the Productivity of Wells,” by J.B. Clark.2 Mitchell’s approach was not so destructive as the torpedo approach and packed more energy per square nanometer to tip the scales of global supply sourcing. By leveraging the refinement of existing technologies, such as slickwater fracturing adopted from Union Pacific Resources Group, Mitchell’s engineering ushered in new sources of economic reserves, rebalancing top global supplier positions between North America and the Middle East. An equal contributor to shale success was horizontal drilling. While slant drilling was derisive in the 1920s, legal and more reliable horizontal drilling evolved with major advancement in the 1970s through the use of mud motors, “bent subs,” whipstocks, and measurement-while-drilling tools. The petroleum engineer’s ability to reduce trips, monitor, and course correct through tight lateral intervals advanced getting wells on production sooner, with lowered risks and better financial results. Direct public benefit from results such as this are exemplified by the number of sovereign wealth funds established using oil and gas proceeds: the Alaska Permanent Fund, Texas Permanent University Fund, and funds in Norway and the Middle East, to name a few.

Alaska: Arctic Groundhog Day

Author(s): Wright, Glenn; Elizarde, Tasha | Abstract: Since the early 1980s, Alaska has relied on oil taxes for almost all of its state government revenue. Like many resource-based economies, including many of the Western states, the result is a boom and bust economy. With production declining and the price of Alaska’s North Slope crude around $75 per barrel, the state is in a bust cycle, with a large state government deficit. Although Alaska is experiencing a somewhat improved revenue outlook compared to 2017, the state’s executive and legislative branches continue to wrestle with unpopular political choices; do we implement a state income tax, tap the state’s Permanent Fund sovereign wealth fund (and thereby reduce or eliminate Alaska’s annual Permanent Fund Dividend payment to Alaskan residents), or some combination of those two approaches? In Spring 2018, the Alaska State Legislature—supported by Independent Governor Bill Walker—chose the first of these options, tapping Alaska’s Permanent Fund to fund state government operations for the first time. The result is a dramatically improved fiscal position for 2019, and although the state remains in deficit, chances of a balanced budget are much improved. Use of the Permanent Fund has not been popular, however; a number of incumbents who supported the use Permanent Fund earnings were defeated in November 2018 by opponents who campaigned on the issue. At the moment, Alaska’s fiscal future remains in doubt.

Der Alaska Permanent Fund – Vorbild für eine Soziale Dividende?

Zusammenfassung: Nur wenige konnten in Deutschland vom starken Anstieg der Kapitaleinkommen in den letzten Jahrzehnten profitieren. Doch eine Soziale Dividende finanziert über einen Staatsfonds nach Vorbild des Alaska Permanent Funds könnte ein inklusiveres Wachstum fördern: Eine Wachstumsinzidenzanalyse mit dem SOEP zeigt, dass deutlich mehr Haushalte bei einer Einführung der Sozialen Dividende vom realen Einkommenszuwachs zwischen 2002 und 2012 profitiert hätten. Die Erweiterung dieses Ansatzes um die Einführung individueller Vermögenskonten zur Möglichkeit der Reinvestition der Dividende über den staatlichen Fonds würde allen Bürgerinnen und Bürger zudem die Chance geben, mit staatlicher Unterstützung eigene Vermögenseinkommen zu generieren. Wenn eine Soziale Dividende allerdings relativ zeitnah an die gesamte Bevölkerung ausgezahlt werden soll, reichen vorhandene Finanzierungsquellen nicht aus. Deutschland bliebe daher nur ein schuldenfinanzierter Finanzierungsansatz. Dieser ist zwar in der Theorie recht elegant, birgt aber auch Risiken.

Guaranteed Nonlabor Income and Labor Supply: The Effect of the Alaska Permanent Fund Dividend

Abstract One peculiar source of nonlabor income that has not been extensively studied for its effect on labor supply is the Alaska Permanent Fund (APF) dividend. This is somewhat surprising given the recent policy focus on Guaranteed Basic Income programs. An annual lump-sum payment, the Permanent Fund Dividend (PFD) is available to almost all Alaska residents, is clearly exogenous with respect to work effort, and – while relatively predictable – varies over time and across households (since it increases linearly with family size). This paper estimates the nonlabor income elasticity of labor supply using exogenous variation from the Alaskan PFD and data from the American Community Survey (ACS). The analysis finds that men have elasticities between −0.15 and −0.10, depending on the specification. Single women have elasticities between −0.14 and −0.09, while married women have somewhat larger elasticities between −0.18 and −0.11.

Excess Sensitivity of High-Income Consumers*

Using new transaction data, I find considerable deviations from consumption smoothing in response to large, regular, predetermined, and salient payments from the Alaska Permanent Fund. On average, the marginal propensity to consume (MPC) is 25% for nondurables and services within one quarter of the payments. The MPC is heterogeneous, monotonically increasing with income, and the average is largely driven by high-income households with substantial amounts of liquid assets, who have MPCs above 50%. The account-level data and the properties of the payments rule out most previous explanations of excess sensitivity, including buffer stock models and rational inattention. How big are these “mistakes?” Using a sufficient statistics approach, I show that the welfare loss from excess sensitivity depends on the MPC and the relative payment size as a fraction of income. Since the lump-sum payments do not depend on income, the two statistics are negatively correlated such that the welfare losses are similar across households and small (less than 0.1% of wealth), despite the large MPCs.

Using time-to-event analysis to identify preconception and prenatal predictors of child protective services contact.

We examined preconception and prenatal predictors of time to first child protective services (CPS) contact among Alaska children. Data were from the Alaska Longitudinal Child Abuse and Neglect Linkage (ALCANLink) project, a population-representative data source linking 2009-2011 Alaska Pregnancy Risk Assessment Monitoring System (PRAMS) data with administrative data sources through 2015. We examined the incidence CPS contact using the Kaplan-Meier method and predictors of CPS contact using Cox proportional hazards regression. Using data from the Alaska Permanent Fund Dividend and Child Death Review, we censored children who emigrated out-of-state or died during the study period. Significant predictors included low socioeconomic status (HR = 2.23, 95% CI 1.68, 2.96), maternal smoking during pregnancy (HR = 1.87, 95% CI 1.55, 2.24), unmarried maternal marital status (HR = 1.62, 95% CI 1.31, 1.99), urban residence (HR = 1.59, 95% CI 1.32, 1.92), lower maternal education (HR = 1.54, 95% CI 1.24, 1.92), maternal experience of intimate partner violence in the 12 months before childbirth(HR = 1.32, 95% CI 1.01, 1.74), Alaska Native/American Indian race (HR = 1.40, 95% CI 1.15, 1.71), a greater number of living children (HR = 1.20, 95% CI 1.13, 1.29), a greater number of stressful life eventsin the 12 months before childbirth (HR = 1.16, 95% CI 1.11, 1.21), and younger maternal age at childbirth (HR = 0.95, 95% CI 0.93, 0.97). Use of multiple linked data sources and time-to-event analysis methods adds to the growing literature regarding predictors of CPS contact. Results suggest that assessing for and addressing clinical, social, and environmental indicators during the prenatal period may aid prevention efforts in mitigating family need for involvement with CPS.

Resource rents, universal basic income, and poverty among Alaska’s Indigenous peoples

The Alaska Permanent Fund Dividend (PFD) program provides universal basic income (UBI) to all residents from investment earnings of a state sovereign wealth fund created from oil rents. This paper evaluates the effect of the PFD to mitigate poverty among the state’s rural Indigenous (Alaska Native) peoples: a population with historically high poverty rates living in a region with limited economic opportunities. Errors in recording PFD income in data used to calculate official poverty statistics cause them to misrepresent poverty in Alaska and understate the effect of the PFD. Estimating poverty rates with and without PFD income therefore requires reconstruction of family incomes from household-level data. Estimated poverty rates from reconstructed income show that the PFD has had a substantial, although diminishing mitigating effect on poverty for rural Indigenous families. The PFD has had a larger effect on poverty among children and elders than for the rural Alaska Native population as a whole. Alaska Native seniors, who receive additional sources of UBI derived primarily from resource rents besides the PFD, have seen a decline in poverty rates, while poverty rates for children have increased. Evidence has not appeared for commonly hypothesized potential adverse social and economic consequences of UBI.

The Labor Market Impacts of Universal and Permanent Cash Transfers: Evidence from the Alaska Permanent Fund

What are the effects of universal and permanent cash transfers on the labor market? Since 1982, all Alaskan residents have been entitled to a yearly cash dividend from the Alaska Permanent Fund. Using data from the Current Population Survey and a synthetic control method, we show that the dividend had no effect on employment, and increased part-time work by 1.8 percentage points (17 percent). Although theory and prior empirical research suggests that individual cash transfers decrease household labor supply, we interpret our results as evidence that general equilibrium effects of widespread and permanent transfers tend to offset this effect, at least on the extensive margin. Consistent with this story, we show suggestive evidence that tradable sectors experience employment reductions, while non-tradable sectors do not. Overall, our results suggest that a universal and permanent cash transfer does not significantly decrease aggregate employment.

Can space mining benefit all of humanity?: The resource fund and citizen's dividend model of Alaska, the ‘last frontier’

Economically profitable resource exploitation in space is becoming increasingly feasible as more actors - national, public and private-are engaging in space exploration. The Outer Space Treaty (OST), which serves as the basis for the current corpus juris spatialis, declares that no government can claim sovereignty over celestial bodies or outer space itself. Because this is generally interpreted as denying private ownership, the OST is sometimes claimed to be an obstacle to commercial venture, particularly resource exploitation. Such claims ignore a wealth of terrestrial models which promote profitable commercial resource exploitation independent of fee-simple ownership. To achieve an approach to space exploration and exploitation which balances national, international, and commercial interests and a need to prevent conflict and militarization of outer space, terrestrial approaches to managing resource exploitation should be carefully examined for frameworks and mechanisms with potential to serve as models in further elaborating an international regime for space resource exploitation. A previously overlooked terrestrial example, the Alaska Permanent Fund, and its unique citizen's dividend, is explored as one possible model for such a balanced approach that could encourage profit-driven exploration and exploitation of extra-terrestrial resources, reduce the risk of conflict between actors in outer space and simultaneously accrue tangible benefits to all of humanity.

The Labor Market Impacts of Universal and Permanent Cash Transfers: Evidence from the Alaska Permanent Fund

What are the effects of universal and permanent cash transfers on the labor market? Since 1982, all Alaskan residents have been entitled to a yearly cash dividend from the Alaska Permanent Fund. Using data from the Current Population Survey and a synthetic control method, we show that the dividend had no effect on employment, and increased part-time work by 1.8 percentage points (17 percent). Although theory and prior empirical research suggests that individual cash transfers decrease household labor supply, we interpret our results as evidence that general equilibrium effects of widespread and permanent transfers tend to offset this effect, at least on the extensive margin. Consistent with this story, we show suggestive evidence that tradable sectors experience employment reductions, while non-tradable sectors do not. Overall, our results suggest that a universal and permanent cash transfer does not significantly decrease aggregate employment.

The Opportunity Costs of the Alaska Permanent Fund Dividend

<p><em>The Alaska Permanent Fund was established by the State of Alaska in 1976 to save a portion of windfall revenues resulting from the discovery of the large Prudhoe Bay oil field. The Permanent Fund Dividend program, established in 1982, pays out about half the earnings of the Fund to each resident. The dividend was intended to both create a constituency for sound management of the Fund, and directly distribute the State’s resource wealth to its citizens. The dividend has achieved great popularity, and has succeeded in allocating resource rents to boost jobs and personal income, and reduce poverty, while the Fund itself has grown. It has also protected the Fund from frivolous practices. But other sovereign wealth funds without dividends have also prospered. There have been trade-offs associated with the dividend, some of which have become more obvious with the Alaska economy grappling with the impact of chronic low oil prices. These include foregone earnings, political complexity, income inequality, and the question of public vs. private spending.</em><strong></strong></p>

Can an oil-rich economy reduce its income inequality? Empirical evidence from Alaska's Permanent Fund Dividend

The main focus of this paper is to empirically examine the effect of the Permanent Fund Dividend (PFD) payouts on Alaska's income inequality by taking into account the roles of income and population. To that end, an autoregressive distributed lag (ARDL) approach to cointegration and the Johansen cointegration approach are applied to annual time series data from 1963 to 2012. We find that the PFD payouts tend to worsen income inequality in Alaska in both the short- and long-run. We also provide evidence to support the existence of Kuznets' hypothesis for Alaska – growth deteriorates income inequality initially and improves it later. Finally, population is found to reduce Alaska's income inequality in the short- and long-run.

Indigo raises funds for plant microbes

The plant microbiome company Indigo has raised $100 million in its third round of funding, led by the Alaska Permanent Fund. Indigo was formed at VentureLabs, the start-up-generating arm of Flagship Ventures. The company develops beneficial microbes that it discovers inside plants. The microbes can increase yield by conferring resistance to stresses such as water scarcity, the company claims. It just launched a coated cottonseed that improves water efficiency. A wheat product is next.

Explaining Consumption Excess Sensitivity with Near-Rationality: Evidence from Large Predetermined Payments

Using new transaction data I find that consumption is excessively sensitive to salient, predetermined, large and regular payments from the Alaska Permanent Fund, with a large average marginal propensity to consume (MPC) of 30% for nondurables and services. This excess sensitivity is very heterogeneous: The deviation from the standard consumption model is largest for households for whom the loss from failing to smooth consumption is smallest in terms of equivalent variation. The estimated MPCs are monotonically decreasing in the loss and increasing in income for households with sufficient liquidity. I show that the economically and statistically significant excess sensitivity is consistent with households following near-rational alternative plans. For macroeconomic policies, such as an economic stimulus program, these near-rational alternatives might represent the more relevant behavior than the standard consumption model.

Expected Permanent Fund Dividends: New Measures Based on a Narrative Analysis and Archival Data

This paper derives two measures of expected Alaska Permanent Fund Dividends (PFD), which are large annual payments to most Alaskan residents. The first measure is based on a narrative analysis of all major Alaskan newspapers from 1982 to 2014. The second is derived from new data from 1991 to 2014 of the Permanent Fund's income from assets, which largely determines the size of the annual dividend per person. Additional information about the PFD is provided that will help those who plan to use this quasi-natural experiment for future research.

Revisiting the Response of Household Spending to the Alaska Permanent Fund Dividend Using CE Data

This paper revisits the important contribution of Hsieh (2003) to the analysis of the intertemporal allocation of household consumption. Using total expenditures to normalize income from the Alaska Permanent Fund Dividend instead of family income and an extended sample of the Consumer Expenditure Survey (CE), I show that log household spending on nondurables is excessively sensitive to the arrival of this predetermined cash flow, with a statistically significant elasticity between 11% and 16%. The previously estimated non-response can largely be attributed to attenuation bias introduced by substantial measurement error in self-reported before-tax family income, in particular over-reporting of very small values.