Indirect Effects of an Aid Program: How Do Cash Transfers Affect Ineligibles' Consumption?

Authors: Angelucci, Manuela; De Giorgi, Giacomo

Source: The American Economic Review, Volume 99, Number 1, March 2009 , pp. 486-508(23)

Publisher: American Economic Association

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Abstract:

Cash transfers to eligible households indirectly increase the consumption of ineligible households living in the same villages. This effect operates through insurance and credit markets: ineligible households benefit from the transfers by receiving more gifts and loans and by reducing their savings. Thus, the transfers benefit the local economy at large; looking only at the effect on the treated underestimates the impact. One should analyze the effects of this class of programs on the entire local economy, rather than on the treated only, and use a village-level randomization, rather than selecting treatment and control subjects from the same community.

Document Type: Short Communication

DOI: http://dx.doi.org/10.1257/aer.99.1.486

Publication date: March 1, 2009

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