This paper analyzes the monthly patterns of adverse outcomes due to the consumption of illegal drugs by recipients of government transfer payments. We find evidence that certain subpopulations on government cash aid significantly increase their consumption of drugs when their checks arrive at the beginning of the month, and as a result, experience adverse events including hospitalization and death. Using data from California, we find that the overall rate of drug related hospital admissions increases abruptly at the beginning of the month, with admissions increasing 23 % during the first five days of the month. We find that this cycle is driven largely by recipients of Supplemental Security Income (SSI). SSI recipients also experience an abrupt 22 % increase in within hospital mortality after receiving their checks. These findings suggest that “full wallets” adversely affect some aid recipients, and that policymakers should explore alternate disbursement regimes such as a staggered disbursement schedule or inkind support that have the potential to reduce the rate of adverse events.

www.elsevier.com/locate/econbase The effects of government transfers on monthly cycles in drug abuse, hospitalization and mortality ☆

We use multiple years of data from the National Household Survey on Drug Abuse, and the National Survey of Drug Use and Health to assess how the 1997 termination of Supplemental Security Income benefits for Drug Abuse and Alcoholism affected labor market, health insurance, health utilization, and arrests among individuals likely to be affected by the legislation. Our findings suggest that terminating disability benefits against the backdrop of welfare reform did indeed increase economic selfsufficiency among substance users, in the short run (1997-1998). The policy shifts are positively associated with participation in the labor force, current employment, and negatively associated with receipt of SSI, though not with welfare use. The SSI policy changes did not accompany any significant change in rates of insurance, and we did not find significant effects on arrests. Interestingly, respondents were much less likely to report that they were unable to work due to disability in the two years following this policy change. We caution, however, that these policy changes took effect during a period of economic expansion, and our findings perhaps would be quite different during a period of greater economic uncertainty. We are grateful to the National Institute on Drug Abuse for funding this work. We would like to thank Max Kates for outstanding research assistance, and seminar participants at Harvard Medical School and the University of Chicago Social Services Administration for helpful comments. 1