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  3. American Economic Review
  4. March 2009
  5. Indirect Effects of an Aid Program: How Do Cash Transfers Affect Ineligibles' Consumption?

Indirect Effects of an Aid Program: How Do Cash Transfers Affect Ineligibles' Consumption?

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Abstract

Cash transfers to eligible households indirectly increase the consumption of ineligible households living in the same villages. This effect operates through insurance and credit markets: ineligible households benefit from the transfers by receiving more gifts and loans and by reducing their savings. Thus, the transfers benefit the local economy at large; looking only at the effect on the treated underestimates their impact. One should analyze the effects of this class of programs on the entire local economy, rather than on the treated only, and use a village-level randomization, rather than selecting treatment nd control subjects from the same community. (JEL H23, I38, O12, O15)

Citation

Angelucci, Manuela, and Giacomo De Giorgi. 2009. "Indirect Effects of an Aid Program: How Do Cash Transfers Affect Ineligibles' Consumption?" American Economic Review, 99 (1): 486-508. DOI: 10.1257/aer.99.1.486

Additional Materials

JEL Classification

  • H23 Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies
  • I38 Welfare and Poverty: Government Programs; Provision and Effects of Welfare Programs
  • O12 Microeconomic Analyses of Economic Development
  • O15 Economic Development: Human Resources; Human Development; Income Distribution; Migration