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

Journal Article

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.

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