MONEY TRANSFER AND BIRTH WEIGHT: EVIDENCE FROM THE ALASKA PERMANENT FUND DIVIDEND

The positive relationship between income and health is well established. However, the direction of causality remains unclear: do economic resources influence health, or vice versa? Exploiting a new source of exogenous income variation, this study examines the impact of the Alaska Permanent Fund Dividend (APFD) on newborns' health outcomes. The results show that income has a significantly positive, but modest effect on birth weight. We find that an additional $1,000 ($2,331 in 2011 dollars) increases birth weight by 17.7 g and substantially decreases the likelihood of a low birth weight (a decrease of around 14% of the sample mean). Furthermore, the income effect is higher for less‐educated mothers. Based on a gestation‐weight profile in the sample, increased gestation owing to the APFD could explain a maximum of 34%–57% of the measured weight increase, although we are unable to examine all the potential mechanisms.