The Impact of Unconditional Cash Transfers on Labor Supply: Evidence From Iran’s Energy Subsidy Reform Program

This project studies the impact of an extensive unconditional cash transfer program in Iran on incentives to work. Starting in 2011, Iranian families received around $90 (PPP) per person per month as compensation for the removal of sizable energy subsidies. The program has been criticized, among other things, for having reduced the incentives of the poor to work. We use panel data to examine the impact of the cash transfers on labor supply of households and individuals during the first two years of the program. The authors exploit the variation in participation in the initial phase of the program, as well as differences in the intensity of treatment arising from the month in which households were interviewed, which determined the number of months a household had received cash transfers prior to the month of interview. None of the investigations reveal a negative employment effect from cash transfers.