Research

Work in progress


Abstract: Despite experiencing disproportionate poverty, young adults encounter barriers to the implementation of targeted transfer programs due to policymakers' concerns about potential adverse effects. This paper introduces a comprehensive framework for comparing the local welfare effects of increasing government transfers to young adults versus older individuals. It encompasses various age-dependent behavioral responses to changes in government transfers, including educational and labor supply decisions, as well as interactions with parents-to-child private transfers from parents to children. Leveraging bank transaction data, I find that the social marginal utility of a policy targeting young adults compared to a policy targeting older individuals is 2 to 4 times larger, depending on the tagging of young adults. Accounting for fiscal costs, I find that the welfare effect of increasing government transfers to students from low-income families and young workers is 6 and 2 times higher than that of targeting older individuals, respectively. These findings suggest redistributing resources from older to younger individuals would be highly welfare-enhancing.