2018-01 Guaranteed non-labor income and labor supply

One peculiar source of non-labor income that has not been studied for its effect on labor supply is the Alaska Permanent Fund 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 non-labor income elasticity of labor supply using exogenous variation from the Alaskan PFD and data from the American Community Survey. 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 -0.11, while married women have somewhat larger elasticities between -0.18 and -0.11.