The Long-Term Effects of Cash Assistance∗

We investigate the long-term effect of cash assistance for beneficiaries and their children by following up, after four decades, with participants in the Seattle-Denver Income Maintenance Experiment. Treated families in this randomized experiment received thousands of dollars per year in extra government benefits for three or five years in the 1970s. Using administrative data from the Social Security Administration and the Washington State Department of Health, we find that treatment caused adults to earn an average of $1,800 less per year after the experiment ended. Most of this effect on earned income is concentrated between ages 50 and 60, suggesting that it is related to retirement. Treated adults were also 6.3 percentage points more likely to apply for disability benefits, but were not significantly more likely to receive them, or to have died. These effects on parents, however, do not appear to be passed down to their children: children in treated families experienced no significant effects in any of the main variables studied. These results for children are estimated precisely enough to rule out effects found in other contexts and inform the literature on intergenerational mobility. Taken as a whole, these results suggest that policymakers should consider the long-term effects of cash assistance as they formulate policies to combat poverty. JEL Codes: I14, I32, I38, J22 ∗We are grateful to Gerald Ray at the Social Security Administration for his help and support. A special thanks to Nicholas Bloom, Raj Chetty, John Pencavel, and Luigi Pistaferri for their help and guidance with this project. We have also benefited greatly from comments from Mark Duggan, Daniel Garcia-Macia, Caroline Hoxby, Mordecai Kurz, Moritz Lenel, Qian (Sindy) Li, Davide Malacrino, Santiago Pérez, Santiago Saavedra, Juan Rios, Pietro Tebaldi, Alonso Villacorta, Constantine Yannelis, and seminar participants at Stanford University and the Bay Area Graduate Student Public and Labor Economics Conference. We are also thankful for funding from the Social Security Administration through grants #1DRC12000002-03 and #1DRC12000002-04 to the National Bureau of Economic Research; and for funding from the Stanford University Vice Provost for Graduate Education. The views expressed herein are those of the authors and do not necessarily reflect the views of the Social Security Administration. †Stanford University; [email protected] ‡Social Security Administration; [email protected]