Maternity Benefits, Consumption and Labor Supply: Estimating Causal Effects with Bank Transaction Data

Abstract

We study the effects of a large cash transfer to new mothers in the region of Madrid on women’s spending patterns and labor supply. We follow a regression discontinuity design where the running variable is the date of birth, given that mothers were only eligible for the subsidy for births starting in January 1 of 2022. We take advantage of rich and very granular transaction data from a large bank to trace out take-up as well as expenditure patterns and labor earnings. We find that women who were eligible for the large subsidy (500€ per month for more than two years) increased their total spending during the eligibility period, while their labor earnings did not decline. We also show marked spikes in expenditure in the dates immediately following benefit receipt. We conclude that the benefit increased consumption for women with liquidity constraints, without reducing their labor supply in the two years following childbirth. Joint paper with Daniel Fernández Kranz, IE University; Alberto Graziano, Caixabank Research; and Josep Mestres, Caixabank Research).