Effects of Transfer Income on Migration and Rural Unemployment: Evidence from the Alaska Permanent Fund Dividend

Cash transfer payments may affect migration pattens and unemployment in rural
areas where poverty is widespread. To characterize those effects, I examine trends in
migration and unemployment in Alaska in relation to variation in the amount of the
Alaska Permanent Fund Dividend (PFD). The PFD is an annual government cash
transfer guaranteed to nearly all Alaska residents; its amount is based on a five-year
average of the investment earnings of a public endowment. Using the identification
assumption that the PFD amount is not well-correlated with other determinants of
migration or unemployment in Alaska, I show that larger cash transfers are positively
related to migration rates from remote rural areas to urban areas like Anchorage,
Alaska’s largest city. I also show that larger cash transfers are negatively related to the unemployment rate in remote rural areas. These results are statistically significant and robust. Excluding the portion of the PFD that is attributable to the investment earnings of the Alaska Permanent Fund in the most recent fiscal years does not produce significantly different results, suggesting that the identification assumption is wellfounded. I discuss consequences of the migration effect and propose policy responses.