The Welfare and Market Effects of Delays in Humanitarian Assistance

Abstract

Delays in aid delivery are common, yet their impacts on households and markets are theoretically ambiguous and empirically understudied. Models with financial constraints or present bias predict sharp consumption declines, while the Permanent Income Hypothesis predicts consumption smoothing. We test these predictions using high-frequency data and random interview timing in a large refugee camp in Kenya. Households smooth consumption under regular aid cycles, but delays reduce food consumption and food security. Informal credit through shops mitigates short-term impacts, but entails higher prices (+17%). Prices also respond to the timing of aid. Results support credit constraint models.

Keywords: Humanitarian assistance, Cash transfers, Consumption smoothing, Permanent Income Hypothesis

JEL Classification: D50, I38, O12, O19