General Equilibrium Effects of Cash Transfers: Experimental Evidence from Kenya

Dennis Timo Egger · Johannes Haushofer · Edward A. Miguel · Paul Niehaus · Michael Walker

147 citations0/0 files storedNational Bureau of Economic Research

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Poverty, Education, and Child Welfare Income, Poverty, and Inequality Gender, Labor, and Family Dynamics

Abstract

How 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 nonrecipient households and firms, and minimal price inflation.We estimate a local transfer multiplier of 2.4.We interpret welfare implications through the lens of a simple household optimization framework.

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