Tehran Institute for Advanced Studies (TeIAS)

/ Cash Transfers and Labor Supply: Evidence from a Large-Scale Program in Iran __ Djavad Salehi-Isfahani


Cash Transfers and Labor Supply: Evidence from a Large-Scale Program in Iran

May 21, 2018


Khatam University, Building No2.
Address: Mollasadra Blvd., North Shirazi St., East Daneshvar St., No.17. See location on Google map


Dr. Djavad Salehi-Isfahani
Professor of Economics at Virginia Tech


In December 2010, Iran started monthly deposits of cash into individual family accounts amounting to 29% of the median household income as compensation for the sudden removal of hefty energy subsidies. The program has been heavily criticized for its disincentive for work, especially for the poor. We use panel data to study the causal effect of the transfers on labor supply using exogenous variation in the time households first started receiving transfers and in the intensity of treatment, which we define as the share of net transfers from the program in total per capita household expenditures. We find no evidence that cash transfers reduced labor supply, in terms of hours worked or labor force participation. To the contrary, we find positive effects on the labor supply of women and self-employed men.


Djavad Salehi‐Isfahani received his PhD in Economics from Harvard University in 1977. He taught at the University of Pennsylvania (1977–1984) before joining the faculty at Virginia Tech, where he is currently Professor of Economics. He is a Nonresident Senior Fellow at the Global Economy and Development, the Brookings Institution, and Research Fellow at the Economic Research Forum (ERF) in Cairo. He has written opinion pieces for the New York Times, LA Times, Brookings, Project Syndicate, Al Monitor and the Lobelog. He blogs on Iran’s economy at djavadsalehi.com.