Cash Transfers and Development

Give Directly and Mobile Money Systems

• Give Directly leverages mobile money systems in Africa to transfer funds directly to individuals via their mobile phones.
• This approach is both easy and cost-effective, facilitating the direct provision of money to impoverished individuals.
• Give Directly stands out as a prominent and rigorously researched organization in the cash transfer domain.

Impact Evaluation in Kenya

• A study conducted in Kenya revealed substantial impacts from cash transfers.
• Transfers ranged from 400 to 1,500 to poor families.
• 400 is approximately double the average local monthly household expenditure.
• This is akin to providing around 12,000 to a typical household in the United States.
• Even 14 months post-transfer, recipient households exhibited increased spending on food, health, and education compared to non-recipient households.
• The funds were largely invested in durable goods such as metal roofs and livestock like cows for milk and meat.

Psychological Well-being and Stress Reduction

• Recipients reported increased happiness.
• They exhibited lower stress levels compared to the control group, as measured by cortisol levels in their saliva.
• Cortisol, a stress hormone, increases in saliva when stressed and decreases when less stressed.
• Cash recipients showed improved (reduced) cortisol levels indicating reduced stress.

Meta-Analysis of Cash Transfer Programs

• A recent meta-analysis aggregated results from 72 different cash transfer programs across the globe (15 studies).
• The analysis demonstrated strong positive effects of receiving cash in 10 out of 13 outcomes studied, especially in consumption.

Consumption Results

• Consumption refers to the total household expenditure on food and other items.
• The analysis used a visual representation with a vertical line indicating zero effect; points to the right suggest positive effects.
• Confidence intervals (horizontal whiskers) not crossing zero indicate statistically significant positive effects.
• The study revealed overwhelmingly positive effects on consumption, with very few studies showing negative impacts.
• The long table of panel ordered the smallest effects to the biggest effects.

Broader Impacts of Cash Transfers

• Research indicates that cash transfers have impacts beyond simply alleviating monetary poverty.
• Giving people cash can bump them out of poverty.
• A robust enterprise studied different aspects of cash distribution.

Modalities of Distribution

• Researchers have examined various distribution methods:

  • Lump sum versus spaced out transfers (weekly, monthly, or yearly).
  • Spacing transfers out resembles a universal basic income approach.

• The color coding in the figure from the study reflects the nature of the money stream.

  • Light blue = ongoing stream of money that had ended by the time the data was collected.
  • Orange = single lump sum payment.

• In general, the data suggests positive effects are bigger when there's an ongoing stream.

Key Research Questions Explored

• Does the frequency of transfers matter?
• Does the size of the transfer matter?
• What are the policy implications of transfer sizes?

Transfer Size: An Indian Study

• One study in India found that providing enough money for a family to purchase a cow had significant long-term impacts.
• If they gave less than a cow, the benefits of getting the money tailed off over time.
• The cow provided milk, calves, and a sustained income stream.
• This highlights level effects and a lumpiness in the curve that traces the amount you give and the long-term benefits.

Variation in Targeting

• Research has also explored targeting strategies:
  • Male versus female head of household as the recipient.
  • Outcomes generally improve when cash is given to the female head of household.
  • Universal distribution versus income or poverty thresholds for eligibility.
  • Household composition determining eligibility: for example, households with young children.

Cash Benchmarking

• Cash benchmarking compares cash transfers to traditional development programs:
  • Nutrition supplements
  • Job training
  • Fertilizer subsidies
  • Psychological counseling
• Researchers compare the per-person cost of such programs to providing an equivalent cash amount.
• The aim is to ascertain the counterfactual: What would happen if the money spent on specific programs was instead given directly to poor people?

Conditional vs. Unconditional Transfers

• Studies compare the impact of unconditional cash transfers with those that have conditions attached:
  • Or a nudge: providing cash along with suggestions on effective uses (e.g., children's education, livestock purchase).

Effects of Cash Transfers on Various Outcomes

• Beyond poverty reduction, research examines impacts on:
  • Health and nutrition
  • Diet quality
  • School attendance
  • Educational attainment
  • Life satisfaction
  • Business activity
  • Saving and investments
  • Psychological well-being

Community-Level Effects

• Research explores effects on social relations and community dynamics:
  • Intimate partner violence
  • Community inequality
  • Child labor incidents

Conflict Resolution Project in Mali

• A USAID project in Mali investigated whether cash transfers could aid conflict resolution.
• In impoverished communities, everyday triggers can spark conflicts, particularly when people are financially strained.
• The project aimed to alleviate financial insecurity and reduce intergroup conflicts.
• A factorial design compared cash transfers, conflict mediation programs, a combination of both, and a control group.
• The project was canceled after President Trump cited it as an example of wasteful spending.

Unconditional Cash Transfers: A Powerful Tool

• Unconditional cash transfers can be a really powerful tool.
• GiveDirectly's website summarizes findings from various projects, highlighting the positive impacts of cash transfers.

Limitations and Long-Term Effects

• Unconditional cash transfers do not solve every problem.
• A study by Chris Blattman in Northern Uganda examined the long-term effects of cash transfers to unemployed youth.

Blattman Study in Uganda

• The program provided a year's income (382) to unemployed youth applying in small groups.
• The money was explicitly unconditional and given in a lump sum.
• 535 groups were selected, and a coin flip determined whether they received funding.
• Researchers surveyed 2,600 youths from treatment and control groups before, two years after, and four years after the disbursement.

Findings

• The money was used for investments, primarily in skilled trades or starting businesses.
• Earnings were higher in the treatment group after two and four years.
• Total hours worked were also higher in the treatment group.

Long-Term Results and Implications

• Nine years after the initial transfer, incomes in the control group had caught up with the treatment group.
• However, beneficiaries earned a cumulative $665 more over those nine years, representing a 74% return on the initial investment of $392.
• The treatment group possessed more durable assets nine years later.
• One-third of recipients never started a business, one-third started but sold it, and one-third started and saw temporary income increases.

Conclusions from the Blattman Study

• The Blattman study raises essential questions about the long-term effectiveness of cash transfers.
• Most studies on cash transfers focus on short-term effects.
• Long-term studies may reveal less positive findings.
• The early excitement about cash transfers may diminish as more long-term data emerges.

Implications for Development Practitioners

• The efficacy of cash transfers challenges the conventional development enterprise.
• Practitioners should evaluate whether their projects offer value beyond what can be achieved by simply giving people money.
• However, simply giving people money unconditionally is not the only solution to improving well-being.

The Role of Institutions, Policies, and Public Goods

• Institutions matter for protecting private property rights, democratic freedoms, and access to information.
• Government policies such as openness to trade, macroeconomic stability, and low corruption levels are crucial for development.
• Public goods like hospitals, roads, and electrification require government provision.

Cautious Interpretation of Results

• We are just beginning to understand the long-term effects of unconditional cash transfers.
• Blattman's less positive findings may be anomalous, but we should not rely solely on short-term positive data.
• Further research is needed to fully understand the impact of cash transfers on development.
• The evidence for cash transfers represents an enormous challenge for those who care about development.

Spillover Effects

• Spillover effects from people receiving cash transfers could positively affect those who did not receive the money directly.
• Compared to not giving transfers, people in the control group might do better by being close to the transfer recipients.

Final Thoughts

• Cash transfers do not build political institutions that protect private property or foster democratic freedoms.