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DR@W Forum - Oliver Hauser (Exeter)
We randomized 5,243 Americans in poverty to receive $500, $2,000, or nothing, then measured their financial well-being, psychological well-being, cognitive capacity, and health through surveys administered one, six, and fifteen weeks later. While bank data show that the cash increased households' spending, we find no evidence that (more) cash improved survey outcomes: estimates are overwhelmingly negative or indistinguishable from zero, in contrast to experts' and laypeople's predictions. Our data suggest that the windfall made participants' (unmet) needs more salient, which caused distress. We rationalize these findings through a model that illustrates how receiving cash can also highlight its absence.
Working paper available at SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4154000Link opens in a new window