The effect of unconditional cash transfers on adult labour supply: A unitary discrete choice model for the case of Ecuador

We examine the effect of unconditional cash transfers by a unitary discrete labour supply model. We argue that there is no negative income effect of social transfers in the case of poor adults because leisure could not be assumed to be a normal good under such conditions. Using data from the national employment survey of Ecuador (ENEMDUR) we estimate the effect of the Bono de Desarrollo Humano (BDH). Results show that cash transfers, unconditional in labour, do not produce labour disincentives in the case of household heads, but may be paying for housework and childcare provided by partners and single adults. However, labour market and care work gender inequality must be addressed by complementary policies.

Keywords - Basic income, Cash transfers, Labour supply, Ecuador

JEL Classification - H24, H30, J22, O12