Direct Cash Transfers Against Poverty

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Direct Cash Transfers Against Poverty

Nico Pitney:

"Cash transfer programs have an extensive research record, including dozens of peer-reviewed studies spanning at least 13 countries in four continents. The UK's development agency calls cash transfers "one of the more thoroughly researched forms of development intervention"; a gold-standard charity evaluation group GiveWell (not affiliated with GiveDirectly) says transfers "have the strongest track record we've seen" for a non-health poverty program.

Longer-term research into anti-poverty interventions is rare, but it exists for cash transfers. A 2013 study in Uganda found that people who received cash enjoyed a 49 percent earnings boost after two years, and a 41 percent increase after four years, compared to people who hadn't gotten a transfer. Another study in Sri Lanka found rates of return averaging 80 percent after five years. In Uganda, not only were the cash recipients better off, but their number of hours worked and labor productivity actually increased.

Do many people just end up wasting their money on alcohol or smokes? Last year, the World Bank reviewed 19 studies of cash transfer programs and said the answer is no. “Almost without exception, studies find either no significant impact or a significant negative impact of transfers on expenditures on alcohol and tobacco," the report stated. "This result is consistent across the world."

Cash transfers aren't a silver bullet. One program gave $200 to at-risk Liberian men who were either homeless or who made their income from dealing drugs or stealing. The lead researcher, Chris Blattman, summarized the findings in an op-ed in The New York Times:

"Almost no men wasted [the money]. In the months after they got the cash, most dressed, ate and lived better. Unlike the Ugandans, however, whose new businesses kept growing, the Liberian men were back where they started a year later. Two hundred dollars was not enough to turn them into businessmen. But it brought them a better life for a while, which is the fundamental goal of any welfare program. We also tested a counseling program to reduce crime and violence. It worked a little on its own, but had the largest impact when combined with cash."

...

The positive impacts of cash transfers have been consistent and wide-ranging, from improved nutrition, healthier newborns and greater school participation to decreased HIV infection rates and psychological distress. As a result, according to a 2011 review by the UK’s development agency, global aid has undergone a “quiet revolution,” with developing countries launching transfer programs believed to reach between 750 million and one billion people." (http://www.huffingtonpost.com/2015/06/04/givedirectly-cash-transfers_n_7339040.html)