General equilibrium effects of cash transfers: Experimental evidence from Kenya
This journal article, published by Econometrica, examines how large one-off cash transfers affect household welfare, local economic activity, spillover effects, and economic growth in rural Kenya. See the abstract below for details.
Authors
Johannes Haushofer
Assistant Professor of Psychology and Public Affairs, Princeton University
Edward Miguel
Distinguished Professor of Economics, University of California - Berkeley
Paul Niehaus
Chancellor’s Associates Endowed Chair in Economics, University of California - San DiegoMichael Walker
PhD studentHow large economic stimuli generate individual and aggregate responses is a central question in economics, but has not been studied experimentally. We provided one-time cash transfers of about USD 1000 to over 10,500 poor households across 653 randomized villages in rural Kenya. The implied fiscal shock was over 15 percent of local GDP. We find large impacts on consumption and assets for recipients. Importantly, we document large positive spillovers on non-recipient households and firms, and minimal price inflation. We estimate a local transfer multiplier of 2.5. We interpret welfare implications through the lens of a simple household optimization framework.