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The idea of providing a universal basic income —giving people money just for breathing— has been getting quite a bit of attention lately. Some liberals see it as a way to reduce the effects of growing income inequality, while some libertarian-leaning conservatives like the idea of replacing government-run services with cash and letting recipients decide how to spend it.

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CNN Digital columnist John D. Sutter recently reported on a town where the basic income is already a reality, Cherokee, North Carolina. The town’s adult Native American residents each receive thousands of dollars a year in casino profits. As Sutter notes, the town has created a sort of natural experiment.

In a 2010 paper, a team of researchers looked at how the payments, which started in 1997, affected children. They determined that the payments increased the likelihood that kids would graduate from high school and reduced the chances that they would get involved in criminal activity. That was particularly true for the town’s poorest children. For those kids, an extra $4,000 in annual household income added up to an additional year of education and a 22 percent reduction in the chance of committing a minor crime at ages 16 or 17.

How does giving families money help kids? The researchers found at least part of the explanation seems to be that adults who received the payments were able to be more effective parents. They were less likely to commit crimes and more likely to know where their kids were and what they were doing. Children in families receiving the payments also reported a higher number of positive interactions with their mothers (though there was no statistically significant effect here when it came to fathers).

The authors suggest that getting a bit more money reduces stress and other mental health problems related to poverty. (Parents receiving the payments didn’t work any less, so the change was not about simply spending more time with their kids.) The fact that a simple transfer of money could produce this kind of change provides an interesting corrective to the frequent focus on supposedly deep-seated cultural differences to explain class differences among children.

Sutter notes that the casino payments in Cherokee have grown in recent years and now stand at about $10,000 per person. Future research may show us what the rising payments will mean for the children growing up there now.



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American Economic Journal: Applied Economics, Vol. 2, No. 1 (January 2010), pp. 86-115
American Economic Association