Evidence

Research on cash transfers

Last updated Dec 22, 2020

Many people (including us) grew up hearing that “you can’t just give money to poor people.” As it turns out, this view was largely based on anecdote and hearsay; the first rigorous experimental testing of this approach (and many others) did not begin until the 1990s. Since then we have learned an enormous amount about the impacts that cash transfers have had on the lives of people living in poverty, with over 300 studies from around the world.

Summarizing the results of these studies is a difficult task –– in part because the whole point of cash transfers is to give different people the freedom to do different things, so there is no one answer to “the impacts” of cash. Also, cash transfers can come in different amounts, at different frequencies, and with varying levels of hoops to jump through to receive them. We do our best below to draw out the main lessons as we understand them, citing independent external reviews of multiple studies whenever possible and framing individual studies as examples when not.

We are also actively engaged in producing new evidence through a series of more than a dozen experimental studies, which you can read about here.

Independent reviewers agree that cash is an effective way to help people living in poverty.

Governments, non-profits, and researchers have tested variants of “just giving money” all over the world.

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Yet, people living in extreme poverty rarely get to decide how aid money intended to help them gets spent.

Cash transfers, which put aid budgets directly in the hands of the people we aim to help, make up a very small proportion of aid and charitable giving.

Despite the stereotypes, recipients of cash do not systematically waste or misuse it.

Among the hundreds of millions of people who have received cash transfers, some have surely bought beer or worked fewer hours. But systematic reviews of the evidence find that on average these are not the impacts of giving money; if anything, they find the opposite.

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Recipients of cash typically end up less poor and put cash towards improving different aspects of their lives.

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Cash can help drive a range of important, positive changes in people’s lives.

Cash transfers give recipients the flexibility to pursue the goals that matter to them. Of course, people, programs, and priorities vary so effects do too. The chart below summarizes effects from cash programs all over the world on key aspects of wellbeing.

Adapted from Bastagli, Zanker, et al (2016)

Any given change isn’t guaranteed or even likely for any given program, but researchers have linked some cash programs with changes in a wide variety of outcomes, including, HIV rates, child mortality, suicide rates, child growth, self-reported health, intimate partner violence, school attendance, stress, and depression, and deforestation.

These results don’t mean people living in poverty will always be the best at deciding how money should be used, but it raises the question why we’ve been trusting the vast majority of our giving to an aid industry with a pretty patchy track record of allocating capital.

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Frequently asked questions

+Conditions: why does GiveDirectly give “no strings attached”?

There’s strong evidence that paying people to take certain actions (e.g., ensure children attend school) makes them more likely to do so. Depending on the condition and which aspects of wellbeing you prioritize, such conditions can be more or less worthwhile. But they can also be costly to enforce and can exclude the most vulnerable members of a community.

“Without targeting or monitoring of conditions, the estimated long-run CTR [cash transfer ratio declines] about 40 per cent, underscoring that targeting and conditioning require substantial resources.”
Caldés & Maluccio (2005)

“By denying noncompliant [(excluded)] adolescent girls and young women cash transfers at precisely the moment when they are most likely to start childbearing, a myriad of potential benefits might be missed under CCT programs.”
Baird et al. (2019)

+Training: shouldn’t you “teach a man to fish” instead?

Training can be expensive and hard to do well.

“Skills training and microfinance have shown little impact on poverty or stability, especially relative to program cost.”
Blattman & Ralston (2017)

“Drawing on a systematic review of over 500 documents, this study finds that although FFS [Farmer Field Schools] have changed agricultural practices and raised yields in pilot projects, they have not been effective when taken to”
Waddington & White (2014)

Also, the people we serve often know a lot about fishing and other ways to make a living.

+What’s the evidence on GiveDirectly’s programs specifically?

We review the research studying cash transfers delivered by GiveDirectly here. We are constantly testing different ways of delivering cash transfers to different types of people to find which approaches best achieve different outcomes.

+What about the long-term effects of cash?

In general, we know less about how the effects of cash (or other development interventions) evolve over time. The relevant test is not whether effects last forever, but whether they’re large enough and durable enough to be worthwhile. For example, most people would prefer an investment that returns $99 tomorrow over one that returns $1 a year for 100 years. Unlike investments, there’s no omnibus measure of returns with development programs, so aggregating impacts over time to judge how worthwhile a program is is methodologically and morally difficult. We’re looking forward to reviewing and creating more evidence on this subject over the next several years, but below are some examples of these dynamics.

“Four years on, an experimental evaluation found grants raised earnings by 38% … We return after 9 years to find these start-up grants raised earnings and consumption temporarily only. Grantees’ investment leveled off; controls eventually increased their incomes through business and casual labor; and so both groups converged in employment, earnings, and consumption … We estimate a discounted present value of total earnings gains of roughly $665 — almost twice the size of the grant …”
Blattman et al. (2020)

“[W]e collected … records of applicants to the Mothers’ Pension program—the first government-sponsored welfare program in the United States (1911–1935) … Male children of accepted applicants lived one year longer than those of rejected mothers. They also obtained one-third more years of schooling, were less likely to be underweight, and had higher income in adulthood than children of rejected mothers.”
Aizer et al. (2016)

“We examine the medium-term effects of a two-year cash transfer program targeted to adolescent girls and young women. Significant declines in HIV prevalence, teen pregnancy, and early marriage among recipients of unconditional cash transfers (UCTs) during the program evaporated quickly two years after the cessation of transfers. However, children born to UCT beneficiaries during the program had significantly higher height-for-age z-scores at follow-up.”
Baird et al. (2016)

+Do women and men spend cash transfers differently?

“While one might expect differences in outcomes depending on the gender of the main recipient, based on the four studies included in this review, for most of the indicators in this review there does not appear to be strong support for differences arising from specifically targeting either men or women.”
Bastagli et al. (2016)

+Spillovers: how are non-recipients affected?

By definition, cash programs affect both recipients and those around them. After all, a dollar spent is a dollar earned by someone else. Whether those dynamics play out in ways that improve the lives of non-recipients, or instead make them harder, is an increasing area of focus for research. One channel that a cash can affect the local economy is price effects –– if prices rise, then people who were already poor can buy even less with their money. Another is increasing economic activity –– if a recipient buys iron sheets from a non-recipient, that’s good for the non-recipient’s business and their overall welfare. A third potential channel is the psychological impact of seeing someone else receive a windfall when you do not.

The picture is not consistent across studies for any of these channels. The impact of cash programs on local economies may vary according to how well connected those markets are. When markets are more remote, price effects seem to be larger, which can have negative consequences for non-recipients. Conversely, in well-connected markets, price effects seem to be very small, and the increase in economic activity can drive large, positive spillovers for non-recipients.

We show that the program benefits ineligible [(non-recipient)] households who live in treatment villages by increasing their food consumption level by about 10%, approximately half the size of the increase in food consumption for eligible households. This consumption increase is financed through higher loans and transfers from family and friends, and through a reduction in savings.”
Angelucci & De Giorgi (2009)

“Importantly, we document large positive spillovers on non-recipient households and firms, and minimal price inflation … Despite not receiving transfers, [non-recipients] exhibit large consumption expenditure gains: their annualized consumption expenditure is higher by 13% eighteen months after transfers began … driven largely by increases in wage labor earnings.”
Egger et al. (2019)

“In less developed villages—poorer and more remote—our results tell a different story: Here, the price effects we estimate are economically significant.”
Cunha et al. (2019)

“[A] cash transfer program significantly raised the local price of key foods relevant for child nutritional status. This shift in prices increased stunting among young non-beneficiary children by 34 percent (11 percentage points).”
Filmer et al. (2018)

One proposal for addressing the issue when designing cash programs for more remote communities is to make transfers to every household in a village –– this is an approach we have adopted in a number of GiveDirectly programs.