[Update as of 16 November 2015: this post has been edited to accurately reflect GiveDirectly’s role in the study. They did not design the randomization scheme and had not seen the results before the paper was released. Paul Niehaus from GiveDirectly has also informed me that future research with their clients will no longer involve randomization at the household level, and that they are offering cash transfers to the comparison group from the earlier study.]
Is it ethical to give cash transfers to some poor people while their equally poor neighbors get nothing? Johannes Haushofer, James Reisinger and Jeremy Shapiro just released a new study of this program design with GiveDirectly. They found that people who received nothing were less happy than they’d been before the program started. Anke Hoeffler has taken them to task for this, essentially arguing that these negative effects are so predictable that it’s unethical to study them, no matter how clever the research design.
As a basic point of research ethics, I agree that a study should never be designed to knowingly decrease participants’ wellbeing. However, this wasn’t the goal of this project. The new paper builds on earlier work by Haushofer & Shapiro (2013), which randomized access to cash transfers at the household level in order to examine both direct effects (on recipient households) and spillover effects (on their non-recipient neighbors). Ex ante, the expectation was that the neighbors might still benefit from the program, as recipient households shared resources through informal insurance networks. While the prospect that the program would create jealousy or unhappiness among the neighbors might seem obvious in one sense, other studies have indicated that transparent eligibility criteria for cash transfers can mitigate unhappiness among non-recipients, so it wasn’t clear that household-level randomization would make non-recipients either economically or psychologically worse off. Clinical equipose still applied.
As it turned out, the 2013 study found that the spillover group didn’t see any economic benefit from the program. This might explain part of the 2015 findings – people might be unhappy not only because their neighbors received cash grants, but also because they failed to share their resources. Finding a negative outcome doesn’t make the research design inherently unethical, but researchers now have an additional datapoint to consider when thinking about how future studies of cash transfer programs might be designed.
Given this new evidence, could there ever be a good reason to distribute cash transfers to fewer than 100% of eligible poor people in a town (as a long-term program design rather than a short-term research project)? It’s not clear to me that there is, although not for the reasons that Hoeffler points out. Most countries haven’t got the funding to offer a basic income guarantee to all citizens, so distributional questions are an important aspect of program design. Say a program only has the funding to provide a certain level of grants to 50% of eligible people. Should the grants be allocated to all the poor people in 50% of towns to avoid conflict among neighbors, perhaps at the cost of conflict between towns (c.f. Bates 1974)? Or might it be preferable to reduce the value of the grants by 50% and provide them to all eligible people in each town, with the possibility that this makes the amount too low to make a meaningful difference? Note that this latter solution is a formal version of what Haushofer & Shapiro believed might happen anyway – if recipient households are assumed to share their large grants with their neighbors, it’s simply a less efficient way to give everyone a small grant. It would be fascinating to see a study comparing these two targeting schemes.
Eduardo Porter had a fantastic article in the NYT last week about the myth that welfare programs make their recipients lazy and entitled. He highlights recent research from a team of MIT and Harvard economists which finds that cash transfer programs in low income countries don’t discourage people from working, and connects this to other studies which find the same result for American welfare programs. In particular, most of the ostensible success of the 1990s welfare reforms were attributable to the strong economy, and poverty increased again with the recessions of the 2000s. Meanwhile, pushing people off welfare probably led to worse outcomes for children who grew up in poverty.
If the evidence base for cash transfers in low income countries is so strong, should we expect to see the same effects in high income countries? My prior on this is that we should, and there seems to be an increasing amount of evidence supporting this position. Aside from the study that Porter mentions on the Mothers’ Pension Program, which took place in the early 20th century, I’ve found two relatively more recent studies that evaluate the use of cash transfers in North America. One looks at a town in Manitoba where poor residents were given basic income grants for four years in the late 1970s. People with no other sources of income were given grants up to 60% of the poverty line, and people with some outside income received smaller grants on a sliding scale (the precise value is not specified in the study). Evelyn Forget analyzed administrative data from the town some years later, and found that grant recipients experienced a range of benefits. They were less likely to be hospitalized for work-related injuries, car accidents, domestic abuse, or mental illness. Children’s test scores increased, even as their dropout rates decreased, and more adults went back for continuing education. While there was a small decrease in hours worked, this mostly came from mothers of young babies and teenagers, who are arguably investing in other types of human capital by raising children or staying in school.
The second study tracks a group of children in North Carolina who were members of the Eastern Band of Cherokee Indians, and whose families began receiving an extra US$4000 per capita each year after a casino was build on their land in the mid-1990s. Researchers found that the grants lowered rates of behavioral and economic problems among treated children, and improved their relationships with their parents. It also increased personality traits that are correlated with financial success later in life, like conscientiousness and agreeableness. (The researchers don’t discuss the grants’ impact on children’s incomes or educational achievement in this paper, although I assume they’ll do in future work if they have the data.)
Goats and Soda recently ran a story about IPA’s evaluation of a negotiation skills program for young women in Zambia. The program was based on a course taught at Harvard Business School. Final results aren’t out yet, but the article highlights the experience of Madalitso Mulando, who successfully negotiated with family members to get money for her school fees.
Then, [Mulando] called her older sister, who gave her nearly $70. And somehow her parents came up with the last $25.
But she still needed money for textbooks. So she called the person her mother least wanted her to call: her uncle, Neba Mbewe. … Mulando’s mother, Dorcus Mulando, says the idea of begging from her older brother was shameful. He’d refused them so many times before. … Like most of us, she saw the situation as a fixed pie. Her brother had more, she had less. Any act of asking felt shamefully like begging.
Mulando, though, had learned to see it differently. She’d learned about things like “core values” and “aligning incentives.” This 15-year-old girl didn’t feel she was asking her uncle for money. She was expressing to him how much she desired to finish her education, something he has often encouraged her to do, and what she needed to achieve that goal.
[In the end,] Mulando’s uncle shelled out the $25 that she needed to buy all of her books for the year. And Mulando was able to enroll in 10th grade.
This strikes me as the development analogue to Dani Rodrik’s idea of second-best institutions. As education interventions go, it’s fairly minimal, aimed at redistributing money from richer family members to poorer. It won’t be so useful for students whose relatives are all quite poor, and there remain large structural barriers to education for women. But it may still produce good results for many students who aren’t among the poorest of the poor, if Mulando’s example turns out to be representative, and it can be easily implemented within the existing educational system.
Chris Blattman links to a fascinating new article by Anja Shortland and Federico Varese on the governance structures of Somali pirates. Key points:
This article argues that gangs, clans, mafias and insurgencies are, like states, forms of governance. This insight is applied to the case of Somali piracy and the article explores whether protectors of piracy were clearly distinct from pirates; and to what extent protectors coordinated their activities across the Somali coastland. It is shown that clan elders and Islamist militias facilitated piracy by protecting hijacked ships in their anchorages and resolving conflicts within and between pirate groups. Protection arrangements operated across clans, as illustrated by the free movement of hijacked ships along the coastline and the absence of re-hijacking after ransoms were paid. Piracy protection can be thought of as part of a continuum of protection arrangements that goes from mafias to legitimate states. The article concludes by highlighting the implications of the findings for the debate on state-building and organised crime.
Non-state governance continues to strike me as one of the most consistently interesting topics studied in comparative politics today. Thomas Risse’s 2013 book on the topic is a good place to start.
At the FAO’s blog, Ben Davis argues that they don’t. Some key quotes, drawing on recent research on several African projects:
Along with the increase in productive activities, the cash transfers programmes have given households more flexibility with their time. In most countries of sub-Saharan Africa, low paying casual agricultural wage labour is an activity of last resort, when households are desperate for cash. In Zambia, women in beneficiary households reduced their participation in agricultural wage labour by 17-percentage points and 12 fewer days a year. Both men and women increased the time they spent on family agricultural and non-agricultural businesses. … As one elderly beneficiary said, “I used to be a slave to ganyu (low-paid wage labour) but now I am free.”
Cash transfer programmes also have allowed beneficiary households to better manage risk. Fieldwork in Kenya, Ghana, Lesotho, Zimbabwe, Ethiopia and Malawi has found that the programmes increased social capital and allowed beneficiaries to ’re-enter’ existing social networks and/or to strengthen informal social protection systems and risk-sharing arrangements.
One of the important points that I take from this is that the idea of “welfare dependency” as transfer-induced withdrawal from the labor market is overly simplistic. Selecting a livelihood strategy rarely comes down to a binary decision to work or depend on the state, be it in rural sub-countries in Kenya or poor neighborhoods in Chicago. Instead, people choose from a portfolio of livelihood options, often combining various sources of income at the same time. These might include agricultural production, self-employment, waged labor, salaried labor, support from family or friends, and support from the government. Davis’ point suggests that state-provided transfers don’t substitute for all the other livelihood choices here, but rather give people enough of a buffer that they don’t have to resort to the most poorly paid or abusive options quite so often.