Maternity benfits, consumption and labour supply. Estimating causal effects with bank transaction data

Speaker: Prof Libertad González

Affiliation: Universitat Pompeu Fabra and Barcelona School of Economics

Location: Level 6 Boardroom (629), Colin Clark Building (#39), St Lucia Campus

Zoom: https://uqz.zoom.us/j/85101203588

Abstract: We estimate the causal effects of a generous maternity benefit introduced in Madrid in 2022, which granted €500 per month from the fifth month of pregnancy until a child’s second birthday to mothers under age 31 with low or moderate income. We exploit the sharp eligibility cutoff on January 1, 2022, using a regression discontinuity design and high-frequency bank transaction data covering daily spending, earnings, and account balances. Eligible mothers received, on average, over €7,000 in benefit payments during the 29 months surrounding childbirth. Total spending increased by about €1,200, implying an average MPC of 0.16, with strong heterogeneity: the MPC is zero among higher-income mothers compared to 0.41 among lower-income mothers, who show sizable increases in basic-necessity spending and sharp, short-lived spikes in expenditure after each deposit. Higher-income mothers exhibit no meaningful change in consumption, save more than half of the benefit, and display economically large, though imprecisely estimated, reductions in labor earnings. Across administrative, survey, and transaction data, we find no aggregate decline in employment. Overall, the benefit alleviated liquidity constraints for lower-income mothers and enabled modest time reallocation for higher-income mothers without reducing employment.