Health effects of cash transfers: Evidence from the Finnish basic income experiment

This study provides causal evidence that cash transfer programs have the potential to alleviate the income–health trap in advanced countries. We analyze the Finnish basic income experiment, which replaced the minimum unemployment benefits with a guaranteed income for 2,000 randomly selected unemployed persons during the years 2017–2018. The guaranteed income removed all job–search requirements, but participants could still choose to claim unemployment benefits and comply with related obligations. The experiment also increased average income by 9 %–11 %, for two reasons: basic income payments overlapped with benefits due from the pre-experiment period, and basic income was not tapered against labor earnings. Using register data on all prescription medications and secondary care visits, we find that the experiment reduced psychotropic drug use by 8 %–11 %. Our results also suggest a decline in outpatient mental health visits for secondary care. No effects were detected for other health outcomes. Since most participants opted out of the unconditionality aspect of the experiment and continued to claim unemployment benefits, we attribute the observed health effects primarily to the increased income. • The randomized experiment increased participants’ average income by 9 %–11 %. • Health outcomes were objectively measured using data from medical records and prescriptions. • Psychotropic drug use decreased by 8 %–11 %, with suggestive evidence of fewer outpatient visits due to mental health issues. • No significant effects were detected on other health outcomes.