Poverty’s Cash Flow Problem

Charles Kenny extols the benefits of handing out cash to the deeply impoverished:

[Columbia University’s Chris] Blattman and colleagues looked at a program that gave $150 cash grants to 1,800 of the very poorest women in northern Uganda. Most began some sort of retail operation to supplement their income, and within a year their monthly earnings had doubled and cash savings tripled. The impact was pretty much the same whether or not participants received mentoring; business training added some value, but handing over the money it cost to provide would have added more.

Most cash-transfer programs do impose conditions—like requiring kids to go to school or get vaccinated, which does improve school attendance and vaccination rates considerably. But Blattman’s research suggests conditions aren’t necessary to improve the quality of life of poor families.

In fact, while analysis by the World Bank’s Berk Ozler shows that making cash transfers conditional on kids being in school has a bigger impact than a no-strings-attached check, even “conditionless cash” considerably raises enrollment. Conditional programs increase the odds of a child being in school by 41 percent; unconditional programs, 23 percent. Other studies of cash transfers in developing countries have found a range of impacts that had little or nothing to do with any conditions applied: lower crime rates, improved child nutrition and child health, lower child mortality, improved odds of kids being in school, and declines in early marriage and teenage pregnancy.