the evidence on cash transfers

There is a relative abundance of scientific evidence on how the poor use cash transfers; 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)


• 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 comprehensive review of the evidence on cash transfers was recently released by the UK's Department for International Development.  "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. 

new evidence on GivingDirectly

As part of our commitment to transparency we are also conducting an evaluation in Kenya to rigorously document how our own recipients use transfers. The evaluation is led by Dr. Johannes Haushofer of the University of Zurich and is funded by the National Institutes of Health.

Our study uses the current state-of-the-art approach to evaluation, the randomized controlled trial (RCT). RCTs work a lot like medical trials: the research team identifies a large number of eligible households and then chooses some of them by lottery to receive transfers. By comparing households that received transfers to those that did not we can learn exactly how the transfers change recipients' lives.

Endline data collection for the study has concluded and analysis is currently underway. The analysis will measure the impacts of transfers on household consumption, hunger and nutrition, the entrepreneurial activities of households, health (both physical and emotional) and whether children are in school. We will also examine effects on levels of the stress hormone cortisol, an innovative new way of quantifying well-being. In addition to measuring the impact of grants, GiveDirectly will use the findings from the study to improve and refine our operations. Preliminary results for a subset of these outcomes are discussed in our 2012 Annual Report.

1. 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
2. Duflo, Esther, “Grandmothers and Granddaughters: Old-Age Pensions and Intrahousehold Allocation in South Africa,” World Bank Economic Review, June 2003, 17 (1), 1–25.
3. 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
4. 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.
5. 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.
6. 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.
7. Maluccio, John A. and Rafael Flores, “Impact evaluation of a conditional cash transfer program: the Nicaraguan Red de Proteccin Social,” Technical Report 2005.
8. Skoufias, Emmanuel and Vincenzo Di Maro, “Conditional Cash Transfers, Adult Work Incentives, and Poverty,” The Journal of Development Studies, 2008, 44 (7), 935–960.
9. 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.
10. 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.
11. 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.
12. Concern Worldwide, “Cash Transfers as a Response to Disaster,” Technical Report 2007.
13. Brewin, Mike, “Evaluation of Concern Kenya’s Kerio Valley Cash Transfer Pilot,” Technical Report, Concern Kenya 2008.
14. 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.
15. Cunha, Jesse, “Testing Paternalism: Cash v.s. In-Kind Transfers in Rural Mexico,” Technical Report, Stanford University March 2010.
16. 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.
17. 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.
18. 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.
19. Baird, Sarah and Jacobus de Hoop and Berk Ozler. "Income Shocks and Adolescent Mental Health." World Bank Policy Research Working Paper 5644, April 2011.
20. 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.
21. Edmonds, Eric. "Child labor and schooling responses to anticipated income in South Africa." Journal of Development Economics 81 (2006).
22. Edmonds, Eric and Norbert Schady. "Poverty Alleviation and Child Labor." forthcoming, American Economic Journal: Economic Policy.
23. Baird, Sarah and Craig McIntosh and Berk Ozler. "Cash or Condition? Evidence from a Cash Transfer Experiment." Quarterly Journal of Economics 126 (2011).
24. 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.
25. 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).
26. 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.
27. 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.
28. 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.
29. 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.