Can cash grants lift the poor out of poverty? How I've started to change my mind.
A thread on my new paper, with 9-year Uganda results with @nvfiala, & summarized in this terrific @voxdotcom piece by @dylanmatt
Paper here: papers.ssrn.com/sol3/papers.cf…
A thread on my new paper, with 9-year Uganda results with @nvfiala, & summarized in this terrific @voxdotcom piece by @dylanmatt
Paper here: papers.ssrn.com/sol3/papers.cf…
Altogether this was a reminder to me of the importance of economic theory.
What does the micro 201 model tell us? That cash should raise someone's earnings if they (a) have good business or investment ideas, (b) no capital, and (c) can't borrow. With cash they invest and make $.
What does the micro 201 model tell us? That cash should raise someone's earnings if they (a) have good business or investment ideas, (b) no capital, and (c) can't borrow. With cash they invest and make $.
The same model tells us that people who don't get cash grants should catch up. They too have good ideas. If they save a tiny amount every week, it's just a matter of time before they start their own businesses and make $ too.
Unless (and this is the big question)...
Unless (and this is the big question)...
Unless something holds people back from saving.
Maybe holding csh is extremely risky or expensive.
Maybe your husband or relatives come and make claims you can't refuse.
Maybe the little money burns a hole in your pocket before you can save up enough.
Maybe holding csh is extremely risky or expensive.
Maybe your husband or relatives come and make claims you can't refuse.
Maybe the little money burns a hole in your pocket before you can save up enough.
All of these mean that some poor people might stagnate without a grant. A poverty trap!
Or maybe you converge slow slowly you might as well be trapped.
Or maybe you catch up the next year!
Or maybe you converge slow slowly you might as well be trapped.
Or maybe you catch up the next year!
In northern Uganda, the answer seems to be 9 years.
Convergence will be faster in some places (soon I'll put out a paper showing it was 5 years in Ethiopia)
In some cases, like the ultra ultra poor, maybe the grants could have longer lasting impacts.
Convergence will be faster in some places (soon I'll put out a paper showing it was 5 years in Ethiopia)
In some cases, like the ultra ultra poor, maybe the grants could have longer lasting impacts.
And of course this is just one study in one corner of the world.
But this is why for me this was such a powerful reminder of the theory. Of all of the forces pushing poor people to advance even without a kickstart from the government.
But this is why for me this was such a powerful reminder of the theory. Of all of the forces pushing poor people to advance even without a kickstart from the government.
