What happens to one of the world’s poorest places if you randomly pick more than 10,000 poor families out of an eligible pool and give them $1,000 each, no strings attached?
By Francisco Toro
It sounds like a plan some mad scientist might hatch, but no: It was actually a group of researchers from the University of California at Berkeley, Princeton and the University of California at San Diego who came up with it. They have just unveiled the results of a sprawling, first-of-its-kind study that ought to put to bed some enduring myths about the effects of giving cash directly to the very poor in rural Africa.
Dozens of studies have already shown conclusively that just handing very poor people a considerable sum of cash can transform their lives in lasting ways. That is hardly surprising. But this study set out to ask a different question: What about their neighbors?
Say you’re living in deep poverty in rural Kenya, and the poorest people in the village next door to yours get a big cash transfer, but you don’t. Does that do you any good at all? Or is your neighbor’s luck your misfortune, because local prices jump, say, leaving you worse off than before? Setting aside the direct recipients, what do cash transfers do to local economies?
Working in Siaya County, in rural western Kenya, researchers Dennis Egger, Johannes Haushofer, Edward Miguel, Paul Niehaus, and Michael Walker spent five years and more than $10 million to find answers to these questions.