@iza_bonn published an RCT evaluating generous unconditional cash transfers ($8K/year) to low-income households in Spain, to reduce poverty. Quick take: High-quality RCT finds sizable (9% point) adverse effect on employment at roughly the 2 year mark.

Program & Study Design:

  • The study randomly assigned 1200 low-income households in Barcelona to a treatment group that received (dollar-equivalent) $8000/yr for 2 years, vs a control group. The study had excellent baseline balance & measured employment using administrative data with no sample attrition.


  • At follow-up 3 months before the program's end, the study found a sizable adverse effect on the employment rate of lead household members: 36% treatment (T) vs 45% control (C), p<0.05. The effect diminished, but was still statistically significant, over the 6 months post-program.

  • A substudy found that program features affected the size of the adverse effect. 40% of Ts were randomly assigned to a group whose cash transfer was reduced euro-for-euro for additional income they earned; 60% of Ts had their transfer reduced 25-35ยข on the euro for additional income.

  • The substudy found that the adverse effect on employment was about twice as large in the euro-for-euro group vs the 25-35 cents-on-the-euro group, and the difference was statistically significant.


  • These findings suggest a need for caution in the design of anti-poverty programs, to avoid discouraging work effort. There have been some similar RCT findings in the US for programs with a sizable benefit reduction rate on additional income (example).

We use cookies to improve your experience and to help us understand how you use our site. Please refer to our cookie notice and privacy statement for more information regarding cookies and other third-party tracking that may be enabled.

Intuit Mailchimp logo