new evidence on GiveDirectly
To rigorously measure the impact of our work in Kenya, we collaborated with leading evaluation group Innovations for Poverty Action to conduct a randomized controlled trial (RCT). RCTs work like clinical trials in medicine by comparing outcomes for randomly assigned treatment and control groups and are considered the gold standard in development evaluation research. Recipients in the IPA study received an average of $500 over the course of 9–12 months, and roughly 1,500 individuals were included across treatment and control. The study and full list of outcome variables were pre-announced through GiveWell to ensure that negative results could not be suppressed. The RCT puts GiveDirectly in a very small group of charities whose work has been evaluated at this level of rigor.
The study found that transfers from GiveDirectly have large, positive, sustainable impacts across a diverse set of outcomes, including:
- Assets, with recipients increasing asset holdings by 58% primarily through investments in livestock and home improvements (including iron roofs)
- Business and agricultural income, with income gains implying a 28% annual rate of return on transfers
- Expenditures, with increases in nearly every category, but not tobacco, alcohol, or gambling
- Food security, with a 42% reduction in the number of days children go without food
- Mental health, with large reductions in stress and depression and increases in life satisfaction, as measured using validated psychological scales
other evidence on cash transfers
Evidence from GiveDirectly's impact evaluation is consistent with more than a decade of research on cash transfers globally. A 2011 review by the UK Department for International Development calls cash transfers "one of the more thoroughly researched forms of development intervention." Specific impacts vary across studies, since cash gives the poor the flexibility to pursue their own goals, but are uniformly positive:
- Cash transfers benefit children. Many studies find positive effects on the health of children — for example, large increases in height-for-age and weight-for-height in South Africa, large reductions in HIV infection rates and psychological distress in Malawi, and large reductions in the incidence of low birth weight in Uruguay (2,15,16,17,18,19,20,25,26,27,29). Several studies also find that unconditional cash transfers substantially increase schooling and decrease child labor. (21,22,23)
- Cash transfers have long-term impacts. Recipients often save or invest a large proportions of the transfers they receive, generating increases in future income. (1,2,3,4,5,6) One study found that men's annual income five years after receiving transfers had increased by 64%–96% of the grant amount. (24) Another found that four years after youths received one-time grants, they earned 41% more on average than those who had not received grants. (30)
- The poor do not abuse cash as predicted by derogatory stereotypes. Across a range of studies, spending on alcohol and tobacco either decreases, stays constant, or at most increases in proportion with other spending (typically 2–3%). There is no evidence that cash transfers are spent disproportionately at the bar. (3,4,7,12,13,14,15,28) Similarly, most studies find no effect on the number of hours worked. Some studies show increases in working hours as household members migrate to obtain better jobs. (7,8,9,10,11)
A paper on cash transfers by the UK's Department for International Development provides a comprehensive review of the evidence. "Just Give Money to the Poor" (Hanlon, Barrientos, and Hulme) provides a survey in book format, and "Portfolios of the Poor" (Collins, Morduch, Rutherford, and Ruthven) is excellent background reading on the financial lives of poor households.
- Sadoulet, Elisabeth, Alain de Janvry, and Benjamin Davis, “Cash Transfer Programs with Income Multipliers: PROCAMPO in Mexico,” World Development, June 2001, 29(6), 1043–1056
- Duflo, Esther, “Grandmothers and Granddaughters: Old-Age Pensions and Intrahousehold Allocation in South Africa,” World Bank Economic Review, June 2003, 17 (1), 1–25.
- Rubalcava, Luis, Graciela Tereul, and Duncan Thomas, “Spending, Saving, and Public Transfers Paid to Women,” On-Line Working Paper Series CCPR-024-04, California Center for Population Research 200
- Attanasio, Orazio and Alice Mesnard, “The Impact of a Conditional Cash Transfer Programme on Consumption in Colombia,” Fiscal Studies, December 2006, 27 (4), 421–442.
- Gertler, Paul, Sebastian Martinez, and Marta Rubio-Codina, “Investing cash transfers to raise long term living standards,” Policy Research Working Paper Series 3994, The World Bank August 2006.
- de Mel, Suresh, David McKenzie, and Christopher Woodruff, “Returns to Capital in Microenterprises: Evidence from a Field Experiment,” The Quarterly Journal of Economics, November 2008, 123 (4), 1329–1372.
- Maluccio, John A. and Rafael Flores, “Impact evaluation of a conditional cash transfer program: the Nicaraguan Red de Protección Social,” Technical Report 2005.
- Skoufias, Emmanuel and Vincenzo Di Maro, “Conditional Cash Transfers, Adult Work Incentives, and Poverty,” The Journal of Development Studies, 2008, 44 (7), 935–960.
- Bertrand, Marianne, Sendhil Mullainathan, and Douglas Miller, “Public Policy and Extended Families: Evidence from Pensions in South Africa,” World Bank Economic Review, June 2003, 17 (1), 27–50.
- Posel, Dorrit, James A. Fairburn, and Frances Lund, “Labour migration and households: A reconsideration of the effects of the social pension on labour supply in South Africa,” Economic Modelling, September 2006, 23 (5), 836–853.
- Ardington, Cally, Anne Case, and Victoria Hosegood, “Labor Supply Responses to Large Social Transfers: Longitudinal Evidence from South Africa,” American Economic Journal: Applied Economics, January 2009, 1 (1), 22–48.
- Concern Worldwide, “Cash Transfers as a Response to Disaster,” Technical Report 2007.
- Brewin, Mike, “Evaluation of Concern Kenya’s Kerio Valley Cash Transfer Pilot,” Technical Report, Concern Kenya 2008.
- Slater, Rachel and Matseliso Mphale, “Cash Transfer, Gender, and Generational Relations: Evidence from a Pilot Project in Lesotho,” Technical Report, Overseas Development Institute May 2008.
- Cunha, Jesse, “Testing Paternalism: Cash v.s. In-Kind Transfers in Rural Mexico,” Technical Report, Stanford University March 2010.
- Baird, Sarah and Richard Garfein and Craig McIntosh and Berk Ozler, “Effect of a cash transfer programme for schooling on prevalence of HIV and herpes simplex type 2 in Malawi: a cluster randomised trial.” Lancet, February 15, 2012.
- Paxson, Christina and Norbert Schady, “Does Money Matter? The Effects of Cash Transfers on Child Health and Development in Rural Ecuador.” World Bank Policy Research Working Paper 4226, May 2007.
- Aguero, Jorge and Michael Carter and Ingrid Woolard. "The Impact of Unconditional Cash Transfers on Nutrition: the South African Child Support Grant. mimeograph, August 2010.
- Baird, Sarah and Jacobus de Hoop and Berk Ozler. "Income Shocks and Adolescent Mental Health." World Bank Policy Research Working Paper 5644, April 2011.
- Amarante, Veronica and Marco Manacorda and Edward Miguel and Andrea Vigorito. "Do Cash Transfers Improve Birth Outcomes? Evidence from Matched Vital Statistics, Social Security and Program Data." National Bureau of Economic Research Working Paper 17690, December 2011.
- Edmonds, Eric. "Child labor and schooling responses to anticipated income in South Africa." Journal of Development Economics 81 (2006).
- Edmonds, Eric and Norbert Schady. "Poverty Alleviation and Child Labor." forthcoming, American Economic Journal: Economic Policy.
- Baird, Sarah and Craig McIntosh and Berk Ozler. "Cash or Condition? Evidence from a Cash Transfer Experiment." Quarterly Journal of Economics 126 (2011).
- De Mel, Suresh and David McKenzie and Christopher Woodruff. “One-time Transfers of Cash or Capital Have Long-Lasting Effects on Microenterprises in Sri Lanka.” Science 24 February 2012.
- Fernald, Lia and Melissa Hidrobo. "Effect of Ecuador’s cash transfer program (Bono de Desarrollo Humano) on child development in infants and toddlers: A randomized effectiveness trial." Social Science & Medicine 72 (2011).
- Akee, Randall and William Copeland and Gordon Keller and Adrian Angold and Jane Costello. "Parents’ Incomes and Children’s Outcomes: A Quasi-Experiment Using Transfer Payments from Casino Profits." American Economic Journal: Applied Economics 2 (1), 2010.
- Macours, Karen and Norbert Schady and Renos Vakis. "Cash Transfers, Behavioral Changes, and Cognitive Development in Early Childhood: Evidence from a Randomized Experiment." The American Economic Journal: Applied Economics 4 (2), 2012.
- The Kenya CT-OVC Evaluation Team. "The impact of the Kenya Cash Transfer Program for Orphans and Vulnerable Children on household spending." Journal of Development Effectiveness 4 (1), 2012.
- The Kenya CT-OVC Evaluation Team. "The impact of the Kenya Cash Transfer Program for Orphans and Vulnerable Children on human capital." Journal of Development Effectiveness 4 (1), 2012.
- Blattman, Chris, Nathan Fiala and Sebastian Martinez. "The Economic and Social Returns to Cash Transfers: Evidence from a Ugandan Aid Program." CEGA Working Paper, April 2013. [pdf]