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Means-Tested Transfers, Asset Limits, and Universal Basic Income

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Abstract

Asset limits in means-tested transfers can allow for the distribution of scarce aid to families most in need but may offer a disincentive to beneficiaries to build savings necessary to weather economic shocks. In this Economic Commentary, we examine the net worth of transfer recipients along the income distribution and review the economic literature on the matter with a discussion of universal basic income (UBI) as a policy alternative. Using the 2018 Survey of Income and Program Participation, we document that recipients have a smaller average net worth than nonrecipients at every quintile of the income distribution. We also find that participants at the very bottom of the income distribution are in asset poverty, with an average level of assets surrounding testing thresholds. Recent research suggests that the elimination of testing limits, such as in policies similar to a UBI, could present a welfare-improving alternative to the current system, though not without large economic trade-offs.

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  • , 2022. "Means-Tested Transfers, Asset Limits, and Universal Basic Income," Economic Commentary, Federal Reserve Bank of Cleveland, vol. 2022(10), pages 1-8, August.
    • Handle: RePEc:fip:fedcec:94626
    DOI: 10.26509/frbc-ec-202210
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    References listed on IDEAS

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    7. Leah Hamilton, 2021. "Asset Limits in Public Assistance and Savings Behavior Among Low‐Income Families," Social Science Quarterly, Southwestern Social Science Association, vol. 102(1), pages 454-467, January.
    8. Serdar Birinci, 2020. "Unemployment Insurance and Vulnerable Households During the COVID-19 Pandemic," Economic Synopses, Federal Reserve Bank of St. Louis, issue 33, May.
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