New ISER report: What is the PFD's effect on socio-economic well-being?

by Michelle Saport  |   

For the last 37 years, Alaska residents have received a Permanent Fund Dividend (PFD), but it is only recently that researchers have begun to analyze the effect of the PFD on the socio-economic well-being of Alaskans. In a new paper, Mouhcine Guettabi, associate professor of economics and ISER faculty, summarizes the research, including his own, on what is known of the PFD's effect on employment, consumption, income inequality, health, and crime.

While Guettabi provides an overview of what is known, he adds that there is significant room for improving our understanding of the PFD, especially its effect on education, health care usage, migration, financial health, and general welfare.

"What do we know about the effects of the Alaska Permanent Fund Dividend?" reviews analyses of the PFD in the following areas:

Employment. Three papers have examined the effect of the Permanent Fund Dividend on employment and hours. The findings across papers show that the PFD has not had a negative influence on the labor market. In fact, there is evidence of small positive demand responses. Overall, however, the employment-related effects of the dividend are fairly small on annualized basis.

Consumption. Early research showed that Alaskans do not change their consumption patterns in the months after the distribution. More recent work using a detailed data set shows that Alaskans spend significantly more on non-durables (such as cosmetics, cleaning products, food, fuel, and other consumables) and services in the month when they receive the dividend payment, and this excess consumption persists over the first quarter after the dividend payment.

Health. Birthweight: The evidence indicates that the PFD has a positive, but modest effect on birth weight. This effect is particularly pronounced for low income mothers. Childhood Obesity: A recent paper finds that the health benefits extend beyond birth weight. For three-year-olds, there is strong evidence that the PFD reduces obesity.

Poverty. The PFD has resulted in substantial poverty reductions for rural Alaska Natives. These effects have been particularly pronounced for the elderly. Interestingly, the poverty reducing effect of the PFD has declined as regional corporation dividends have increased in size over time.

Income inequality. Perhaps the most unexpected result in this literature is that while the distribution has been shown to reduce poverty, recent evidence suggests that the PFD increases income inequality in both the short and long run.

Crime. In the weeks following the PFD distribution, substance abuse related incidents increase while property crime related events decrease. Additionally, both substance abuse and medical assist instances are increasing in the payment size but there is no evidence that property crime is responsive to fluctuations in the amount.

Media coverage:

Creative Commons License "New ISER report: What is the PFD's effect on socio-economic well-being?" is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
June Archive