General Equilibrium Effects of Cash Transfers: Experimental Evidence from Kenya

54 Pages Posted: 31 Dec 2019

See all articles by Dennis Egger

Dennis Egger

University of California, Berkeley

Johannes Haushofer

Princeton University - Woodrow Wilson School of Public and International Affairs

Edward Miguel

University of California, Berkeley - Department of Economics; National Bureau of Economic Research (NBER)

Paul Niehaus

University of California, San Diego (UCSD)

Date Written: December 2019

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 non-recipient households and firms, and minimal price inflation. We estimate a local fiscal multiplier of 2.7. We interpret welfare implications through the lens of a simple household optimization framework.

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Suggested Citation

Egger, Dennis and Haushofer, Johannes and Miguel, Edward and Niehaus, Paul, General Equilibrium Effects of Cash Transfers: Experimental Evidence from Kenya (December 2019). NBER Working Paper No. w26600. Available at SSRN: https://ssrn.com/abstract=3511310

Dennis Egger (Contact Author)

University of California, Berkeley ( email )

Johannes Haushofer

Princeton University - Woodrow Wilson School of Public and International Affairs ( email )

Princeton University
Princeton, NJ 08544-1021
United States

Edward Miguel

University of California, Berkeley - Department of Economics ( email )

549 Evans Hall #3880
Berkeley, CA 94720-3880
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Paul Niehaus

University of California, San Diego (UCSD) ( email )

9500 Gilman Drive
Mail Code 0502
La Jolla, CA 92093-0112
United States

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