Causal Inference Applied to Income Effects

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The objective of this project is to measure validly the treatment effects of giving additional income to low and middle income families. The study uses the Massachusetts State Lottery as a natural experiment in which some families are randomly assigned additional income and some are not. In the study, there is a treatment group of 400 people who won the lottery and a control group of 400 people who played but did not win. The subjects will be surveyed my mail and by phone. The use of this natural experiment will allow the researchers to make valid inferences about the effects of additional income on these families using a rigorous definition of causality. The people in the treatment group are receiving an average of $25,000 to $50,000 after taxes per year for 20 years. The survey questions cover such topics as labor supply, children's education, divorce and marriage patterns, residential choice, and savings behavior. The data from the surveys will be linked to earnings records from the Social Security Administration. This project should greatly enhance researchers' and policy makers' understanding of how additional income can affect people's lives. The data collected will be of great interest to applied economists, other social scientists, and policy makers.