Unconditional cash transfers and maternal labor supply: Evidence from Bavaria's family allowance

Fabian Böhme

No 01/2026, FAU Discussion Papers in Economics from Friedrich-Alexander University Erlangen-Nuremberg, Institute for Economics

Abstract: This paper investigates the labor supply effects of unconditional cash transfers aimed at young families, using the Bavarian Family Allowance (Familiengeld ), introduced in 2018. The policy provides € 250-300 monthly to families with children aged 13-36 months regardless of employment status or childcare use. Combining difference-in-differences estimates from two complementary panel datasets, I find no statistically significant effect on maternal employment: the pooled estimate is a small and imprecise +4.2 percentage points (95% CI [-1.8, +10.2]). Because Bavaria is the only treated state, I complement the difference-in-differences with randomization inference over placebo states and a synthetic difference-in-differences design that matches Bavaria's pre-policy trajectory; both confirm that Bavaria's estimate falls within the normal range of untreated states, and the specifications that most directly address an imperfect pre-trend-individual fixed effects and the synthetic estimator-center on zero. A triple-difference specification points to a larger positive response among single and low-income mothers, but this pattern does not survive randomization inference and is best read as suggestive. Given that the unconditional design generates only a modest income effect without altering the relative price of employment, the evidence does not support concerns that transfers of this size meaningfully reduce maternal labor supply, nor does it establish a positive activation effect.

Keywords: Family policy; maternal labor supply; cash transfers; difference-in-differences; heterogeneous treatment effects (search for similar items in EconPapers)
JEL-codes: H31 I38 J13 J22 (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:iwqwdp:341986

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