Cash by Any Other Name? Evidence on Labelling From the UK Winter Fuel Payment

• Departmental Seminar

Date and Location

Friday, January 17, 2014, 10:30 AM - 12:00 PM
3001 Plant and Environmental Sciences

Abstract

Government transfers to individuals are often given labels indicating that they are designed to support the consumption of particular goods. Standard economic theory implies that the labelling of cash transfers or cash-equivalents should have no effect on spending patterns. We study the UK Winter Fuel Payment, a cash transfer to older households. Our empirical strategy nests a regression discontinuity design with an Engel curve framework. We find robust evidence of a behavioural effect of labelling. On average households spend 41% of the WFP on fuel. If the payment were treated as cash, we would expect households to spend 3% of the payment on fuel.