Journal Articles

Cash by any other name? Evidence on labeling from the UK Winter Fuel Payment

Date: 21 August 2014
Authors:
Publisher: Elsevier
Published in: Journal of Public Economics , Volume 118, October 2014, pp. 86–96
JEL classification: D12; H24
DOI: 10.1016/j.jpubeco.2014.06.007

Government transfers to individuals are often given labels indicating that they are designed to support the consumption of particular goods. Standard economic theory implies that the labeling of cash transfers or cash-equivalents should have no effect on spending patterns. We study the UK Winter Fuel Payment, a cash transfer to older households. Our empirical strategy nests a regression discontinuity design within an Engel curve framework. We find robust evidence of a behavioral effect of labeling. On average households spend 47% of the WFP on fuel. If the payment were treated as cash, we would expect households to spend 3% of the payment on fuel.